Gemini, Bitstamp, BitFlyer, and Bittrex are some of the big hitters who have come together under the auspices of the Virtual Commodity Association. Announced on August 20, 2018, the plan is another one of a growing number of self-policing measures taking root as the $214 billion industry tries to tackle its reputational risks.
Goals of the Virtual Commodity Association
The VCA is the brainchild of Gemini Trust cofounders Tyler and Cameron Winklevoss, the billionaire bitcoin twins whose attempt to launch the Securities and Exchange Commission rebuffed a bitcoin ETF in July 2018.
According to a statement released on Monday, August 20, the purpose of the VCA is to address the issues that are increasingly acknowledged as key reasons why the industry is having difficulty transitioning into the next stage of its growth.
Monday’s statement revealed that the VCA participants roster now includes Bitstamp, BitFlyer USA, and Bittrex. In line with the goals of the VCA, representatives from the four exchanges will hold an inaugural meeting in September to deliberate on the process of setting up a self-policing industry regulator.
Information released to the media reveals that the Virtual Commodity Association has among its goals a desire to develop, standardize and harmonize industry standards, promote transparency across the cryptosphere and work with regulators such as the CFTC to preempt fraud and rigging of digital asset markets.
According to the statement, Maria Filipakis, formerly of the New York Department of Financial Services has been named as the body’s interim executive director, has been instrumental to the creation of New York State’s cryptocurrency permit, also known as BitLicense.
Much Work to Do
American regulators including the SEC and CFTC place a substantial amount of monitoring responsibility on industry self-policing bodies, without which they could never hope to adequately oversee the many trillions of dollars worth of trades that are executed every day across the many markets they have jurisdiction over.
Consequently, a key sticking point with regulators in the race to achieve regulatory parity with other financial markets is that the crypto industry has very little or no internal oversight or self-regulation.
The SEC rejection in July 2018 of the proposed Winklevoss ETF raised this specific objection, citing concerns about the crypto industry’s capacity for self-monitoring to prevent asset price manipulation and cheating.
This is further compounded by the fact that no financial regulator has direct oversight over the crypto asset class, leading to a sharing of responsibilities between the SEC, FINRA, and CFTC. A threadbare legal framework, which varies widely between states also potentially complicates the situation.
Speaking about the launch of the Virtual Currency Association, Brian Quintenz, a CFTC commissioner said:
“Given the absence of federal oversight jurisdiction in the crypto market, in February and again in March of this year I called on the crypto platform community to come together and develop a self-regulatory organization-like entity that could develop and enforce rules. Today’s announcement is a positive step towards that realization.”