Cameron and Tyler Winklevoss, twin brothers and owners of cryptocurrency exchange Gemini, have spearheaded the creation of a new self-regulatory organisation for the cryptocurrency industry – the Virtual Commodity Association.
Applauding the effort
According to the press release, the organisation’s inaugural meeting will be held in September. It will be at this meeting that representatives will set rules for the market and for its members, which will include transparency obligations. Staffing for its board of directors will also be on the agenda.
Maria Filipakis, former Executive Deputy Superintendent of the New York Department of Financial Services, has been chosen to be the interim executive director. Filipakis said: “I applaud the VCA and its members in their commitment to strengthen the digital asset industry’s regulatory landscape, rules for the protection of customers, and bring forth industry setting best practices and market transparency.”
The VCA invited readers of the press release to share the following quote on Twitter: “We believe in the value of self-regulation, which we pursued in Europe almost from our inception, and look forward to following a similar path in the U.S. Those that can’t or won’t comply with regulations put consumers – and their own operations – at risk.”
Self-regulatory Organisations Filling the Vacuum
As governments worldwide have, with a few exceptions, failed to write up appropriate rules that would legitimise the cryptocurrency industry while protecting customers, related companies have taken the law into their own hands by creating their own groups.
In the UK, CryptoUK was formed in February 2018 by six major cryptocurrency companies (eToro, Commerce Block, Coinbase, CoinShares, BlockEx, CEX IO, and CryptoCompare). Chaired by Iqbal Gandham, who is also the managing director of eToro’s UK branch, the group has urged the British government to catch up with jurisdictions like Malta and Gibraltar and released a 12-point code of conduct that member companies must adhere to.
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The organisation gave evidence to HM Treasury at a parliamentary hearing in June.
In Japan, the Virtual Currency Exchange Association was created in February by the merging of the country’s two largest cryptocurrency organisations.
The self-regulatory organisation was formed in the aftermath of the theft of $530 million worth of cryptocurrency from a local exchange, with its stated aim being to contribute “to the sound development of the virtual currency exchange industry and the protection of the interests of users.”
In June it published a manifesto of more than 100 pages. Its suggestions included a credit limit of 1:4 and the prohibition of anonymous cryptocurrencies such as Monero and ZCash. This last is because these coins are more likely to be used in criminal activities. Interestingly, Gemini became the world’s first licensed trader of Zcash in May 2018. It was approved by the New York Department of Financial Services.
In August the VCEA applied for a licence from the country’s actual financial regulator, the Financial Services Agency.
Another example of a self-regulatory organisation is the Korea Blockchain Association, which was set up in January 2018. Its membership includes the country’s biggest cryptocurrency exchanges.
It lost legitimacy in July because it announced that it had approved all of the country’s twelve cryptocurrency exchanges after having inspected them. Details of the inspections were not released, and chairman Jhun Ha-jin said: “This inspection does not guarantee the absolute safety of the 12 exchanges… It is like a driver’s license. It is hard to tell whether they are good drivers or not.”
The industrious Winklevoss twins actually began talking about an SRO back in March 2018. The millionaires have so far failed in their numerous attempts to get Bitcoin ETFs approved by the Securities and Exchange Commission, but they did acquire a patent for the financial derivatives in June.