Gemini Proposes Self-Regulation for US Cryptocurrency Industry

Virtual Commodity Association will be industry-sponsored independent organization.

by Marin Marinov
14 March • 5 min
In Regulation

Gemini, a US-based licensed digital asset exchange, has proposed the establishment of a self-regulatory body for the US virtual currency market. In a statement, published on its website on Tuesday, Gemini said the suggested Virtual Commodity Association (VCA) will maintain and enforce a system of rules and standards - transparency, sharing of information, promoting responsible financial management and implementing best practices for cybersecurity.

two boys in sport suits, sitting next to each other, and smiling
Cameron and Tyler Winklevoss, the owners of Gemini/Image`s source: cellanr, flicker.com under CC 2.0

Cameron and Tyler Winklevoss, the owners of Gemini, want VCA to “police” the digital currency market. The body will be industry-sponsored and independent, according to the statement. It will cooperate with regulators, including the Commodity Futures Trading Commission (CFTC) to prevent manipulations and thefts.

VCA specifics and rules

The Virtual Commodity Association:

• will be different from traditional trade associations like the Financial Industry Regulatory Authority (FINRA) for securities firms or the American Financial Services Association (AFSA) for the consumer credit industry;

• will not provide regulatory programs for security tokens or security token platforms. Security tokens, as opposed to virtual commodities like Bitcoin, are defined by the US Securities and Exchange Commission (SEC) as being built “on top of” Blockchains and sometimes issued via initial coin offerings (ICOs);

• will follow global standards for self-regulatory organizations (SROs).

VCA is proposed to be governed by Board of Directors that has not a clear structure at the moment. The Board will monitor whether members abide by the internal rules and will impose fines.

Reactions

The announcement of the Winklevoss twins was published a day before first ever public hearing about regulation of the crypto industry in the US House of Representatives. There is no law on a federal level for virtual currencies. Legislative holes are real problems, according to both Republican and Democrat lawmakers.

But while Democrats urge for introducing specific regulation for cryptocurrencies, Republicans are more of free market supporters and prefer self-regulation, saying state regulators should “stay out” of the crypto market.

Government regulation and self-regulation coexist in the US. For example, the US Commodity Futures Trading Commission (CFTC) cooperates with both FINRA and AFSA.

A blonde man, smiling, in front of the US flag
Brian Quintenz, CFTC Commissioner /Image`s source: cftc.gov

CFTC Republican Commissioner Brian Quintenz issued a written statement after Cameron and Tyler Winklevoss announcement: “I congratulate Cameron and Tyler Winklevoss on their energetic leadership and thoughtful approach in outlining a virtual commodity self-regulatory organization (SRO) concept…I encourage Gemini (or any other market participant, advocacy group, platform, or firm) to be aggressive in promoting these qualities within any SRO construct.”

World examples of self-regulation

There are a few examples of self-regulation bodies worldwide. On February 13, 2017, seven UK crypto companies created a trade association with the aim of promoting self-regulation. At the beginning of this year, Korean Blockchain Association was launched with more than 60 members, including the leading 25 crypto exchanges. Last year, Polish cryptocurrency industry adopted a Best Practices Code for the Entities of the Cryptocurrency Market.

mountains in blue color and big capital letters in front of hills
G20 official logo/Image`s source: g20.org

Japan Blockchain Association and the Japan Cryptocurrency Business Association are set to launch a self-regulatory body in April. Japan’s government is expected to recommend the establishment of cryptocurrencies regulation on a global level at the upcoming G20 Summit of financial ministers and central bank governors in Buenos Aires on March 19-20.