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Wall Street News

With Cryptocurrency Markets 'Taking On Water', Industry Could Use an SRO

July 15, 2018

by Howard Haykin


Despite their recent run-up, the cryptocurrencies market remain volatile and an enigma to investors and regulators, alike. So, we revisit a self-regulation proposal from The Brothers Winklevoss. Formation of the Virtual Commodity Association is applauded by at least one CFTC commissioner.


Cameron and Tyler Winklevoss see self-regulation as the next step in their plan for legitimizing cryptocurrencies. Toward that end, the brothers, who run the Gemini exchange for trading Bitcoin and Ether, have a proposal to create the Virtual Commodity Association (VCA), a self-regulatory organization (“SRO”) that would police digital-currency markets and custodians. The non-profit group would aim to develop industry standards, promote transparency and work with regulators including the CFTC to prevent fraud.


The VCA would be a non-profit, independent regulatory organization that: (i) would not operate any markets, would not be a trade association, and will not provide regulatory programs for security tokens or security token platforms; (ii) will, however, be in compliance with global standards and best practices for SROs.


Regulators including the CFTC and the SEC heavily rely on self-regulatory organizations, or SROs, to help them monitor trading in everything from obscure swaps to shares in the biggest U.S. companies. The National Futures Association (NFA) and the Financial Industry Regulatory Authority (FINRA), which are funded by the industry, serve that function. And at least one regulator, CFTC Republican Commissioner Brian Quintenz, has expressed praise for the Winklevoss plan:


“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.”


[For further details, click on Proposal for an SRO for the U.S. Virtual Currency Industry.]