Several cryptocurrency exchanges have joined forces to form a self-regulatory organization, dubbed the Virtual Commodity Association (VCA), for the nascent cryptocurrency industry.
The group, which was initially proposed in March of this year and founded by Cameron and Tyler Winklevoss, has announced Bittrex, bitFlyer, Bitstamp, and the Winklevoss' own Gemini as its first members.
The VCA, which will convene an inaugural meeting in September to flesh out details, has been set up with the intention of establishing a wide-reaching standard for the US digital currency industry.
In addition to developing best practices and promoting transparency, the group will look to collaborate with regulatory bodies like the US Commodities Futures Trading Commission (CFTC) to further develop the regulatory landscape.
Despite its increasing mainstream presence, the crypto space is notoriously opaque.And the lack of transparency in the industry, which has evolved into a $200 billion market with over 1,800 digital currencies, per Coinmarketcap, continues to hamper its development.
- While exchanges and traders have to comply with jurisdictional demands from their domestic authorities, there's no coherent and robust regulatory structure. In the US, for example, regulations relating to cryptos are more like a patchwork of state laws that act as the legal framework for the nascent industry. This absence has, in turn, invited a steady stream of abuse, cons, and market manipulations in the space.
- The fact that a number of exchanges in the space operate without any meaningful regulatory oversight has acted as a stumbling block for organizations working in the sector. The Securities and Exchange Commission has often pointed to this lack of transparency in justifying its decisions to reject applications for a Bitcoin-based exchange-traded fund (ETF).
The development of a self-regulatory organization bodes well for the nascent industry, providing much-needed legitimacy as it moves toward maturation. As a result, the industry is likely to become more attractive to institutional investors, which could also have a significant ripple effect on secondary markets related to cryptos, including the possibility of an ETF, further reinforcing the industry.
Moreover, the intricate knowledge of the group's members will provide valuable support to regulators that may not be well versed in the space. One of the major challenges to crypto regulation by government bodies and formal institutions is the lack of understanding of the space, leading to stringent regulations that could stifle the growth of the industry.
The emergence of self-regulatory groups like the VCA can pre-empt the stiff and inflexible regulatory oversight that these government organizations could otherwise impose.
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Several cryptocurrency exchanges have joined forces to […]