The Virtual Commodity Association, a non-profit, independent organization backed by Gemini founders Cameron and Tyler Winklevoss, is laying the groundwork to advocate its self-regulatory plans before Congress.
A collection of four major cryptocurrency exchanges – Gemini, bitFlyer, Bittrex, and Bitstamp – in collaboration with commercial consultants, law firms, and compliance experts are working to establish a self-regulatory organization (SRO) for the cryptocurrency industry.
The organization has launched six committees to write white papers that delineate industry best practices concerning the Bank Secrecy Act and know your customer procedures, custody and security issues, enforcement protocols, insurance standards, market integrity, and taxation, according to a statement. These measures are made in anticipation of a potential congressional hearing that would affirm the VCA as a self-regulating watchdog.
Yusuf Hussain, VCA President, said the consortium is already “in conversation with supportive regulatory bodies,” and has identified the industry challenges of most concern for the regulatory community.
Each committee will focus on areas where there is still regulatory uncertainty. That being for each branch:
- BSA/AML — how to apply Bank Secrecy Act and Know Your Customer controls, including blockchain analytics and transaction monitoring.
- Custody and Security —how to implement and maintain current best practices for cryptocurrency custodianship.
- Enforcement — how to execute the regulatory policies and procedures established by the VCA and respond to customer concerns and complaints.
- Insurance — how to establish minimum, appropriate insurances and coverages for cryptocurrency exchanges and custodians.
- Market Integrity — how to facilitate cross-market information sharing, surveillance, and auditing to detect and deter manipulative and fraudulent activity.
- Tax — how to establish a tax framework and interpretation of tax code law as it relates to cryptocurrency trading.
By pairing each committee with industry leaders steeped in regulatory knowledge, the VCA aims to develop “well-informed, sensible regulation.”
Additionally, representatives from Navigant Consulting and Perkins Coie will work as advisors alongside each committee.
“The VCA is grateful to the individuals and companies willing to commit their time towards these committees and advance the goals of the VCA in fostering consumer protection and market integrity for the virtual currency industry,” said Hailey Lennon, Secretary of the VCA, in a statement.
“These committees directly address the concerns of regulators that are trying to figure out the crypto space,” Hussain said. He added that the VCA is “not a replacement for but a supplement to traditional regulatory bodies.”
Collaboration with traditional finance
Modeled after FINRA, the VCA will collaborate with traditional financial operators to leverage their expertise when developing practices and standards to better oversee and surveil cryptocurrency markets as well as design appropriate consumer protections.
Hussain said the relationship between traditional finance and crypto does not precisely map, adding that the “Federal government sees challenges in a fast paced, innovative environment.”
“Regulation has to keep that same pace,” he said. Through its commingling of traditional and crypto firms, Hussain said the VCA in a position to “facilitate cross-market information sharing” and curb market manipulation and other fraudulent activities in real time.
By demonstrating a commitment to progress as well as consumer protections, the VCA hopes to “enable crypto becoming mainstream” and entice more, and larger institutions into the field.
In order to become a registered SRO, the VCA will require congressional approval. “Once a good set of standards is in place, we can take those to congress,” said Hussain.
The VCA was founded in 2018 and is open to all U.S. digital asset platforms and custodians.
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