Cameron and Tyler Winklevoss, the founders of cryptocurrency exchange Gemini have unveiled a proposal that seeks to see US cryptocurrency trading platforms establish a self-regulatory organization (SRO).
The brothers announced their proposal for the “Virtual Commodity Association” (VCA) in a blog post, arguing that such an organization is necessary to help the market continue to grow and mature.
“We believe a thoughtful SRO framework that provides a virtual commodity regulatory program for the virtual commodity industry is the next logical step in the maturation of this market. We look forward to engaging with industry leaders, participants, regulators, and legislators on this proposal.”
The VCA would be open to all cryptoasset trading venues that serve US customers, and members would have to agree in writing to submit to certain rules governing security, fiscal management, and information sharing. Members would not be allowed to list security tokens unless they obtained securities trading licenses.
The Winklevoss twins have been among the industry’s most vociferous voices in favor of regulation. Gemini, notably, is one of a select group of companies to be granted a BitLicense under New York’s controversial cryptocurrency regulatory framework.
At present, the Commodity Futures Trading Commission (CFTC) classifies Bitcoin and other cryptocurrencies as commodities, meaning that their cash markets are not subject to CFTC oversight unless fraud or market manipulation occurs.
However, the brothers noted in their proposal that cryptoassets fill a very different role in the marketplace than oil, grain, and other commodities. They pointed to the “strong speculative interest” fueling demand for cryptoassets, the relative dearth of commercial use cases, the low transaction costs associated with trading these assets, and the large number of individual investors who participate in these markets as reasons to adopt new self-regulatory standards.
Calls for exchanges to establish a self-regulatory body intensified recently after Securities and Exchange Commission (SEC) released a statement warning cryptocurrency exchanges that it was a violation of federal regulations for them to list ICO tokens the agency classifies as securities.
CFTC Commissioner Brian Quintenz — who last month encouraged exchanges and other market players to embrace self-regulation and adopt standards for cybersecurity, insider trading, and ethical codes of conduct –praised Gemini’s proposal in a statement posted on the CFTC website.
“Ultimately, a virtual commodity SRO that has the most independence from its membership, the most diversity of views, and the strongest ability to discover, reveal, and punish wrongdoing will add the most integrity to these markets. I encourage Gemini (or any other market participant, advocacy group, platform, or firm) to be aggressive in promoting these qualities within any SRO construct,” he said.
Notably, US exchanges are not the only ones considering adopting self-regulatory standards. Earlier this month, Japan’s 16 licensed cryptocurrency exchanges announced that they were forming a self-regulatory body — a move that came in response to the high-profile hack of Tokyo-based exchange Coincheck, which has still yet to receive regulatory licensure.
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