Winklevoss Twins Propose Self-Regulatory Group For Crypto

News, Regulation | March 20, 2018 By:

Cameron and Tyler Winklevoss, the founders of cryptocurrency exchange Gemini, have submitted a proposal to create an industry-sponsored self-regulatory organization (SRO) that would police the cryptocurrency market.

In a company blog post, the Winklevoss twins proposed setting up the “Virtual Currency Association” (VCA). They argued 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,” the brothers wrote. “We look forward to engaging with industry leaders, participants, regulators, and legislators on this proposal.”

The twins said the VCA will be a non-profit, independent regulatory organization in compliance with global standards and best practices for SROs. It would aim to foster financially sound, responsible, and innovative virtual commodity markets through a system of industry-sponsored standards, sound practices, and oversight. The VCA would collaborate with regulators in order to detect and prevent manipulative and fraudulent acts and practices.

“The SRO approach has historically worked to protect and police various markets,” the twins said. “For example, the National Futures Association is an SRO for the US derivatives industry and is a model for how the VCA can work together with the Commodity Futures Trading Commission (CFTC) to provide additional oversight to virtual commodity cash markets. The promise of virtual commodities and their impact on the future will be profound — but individuals and institutions need to feel safe and secure when transacting.”

In response to the twins proposal, CFTC Republican Commissioner Brian Quintenz congratulated the Winklevosses on their “thoughtful approach” to the area.

“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,” said Quintenz. “I encourage Gemini (or any other market participant, advocacy group, platform, or firm) to be aggressive in promoting these qualities within any SRO construct.”

Currently, regulators have no direct authority over the cadre of exchanges that trade cryptocurrencies in the spot market. Instead, there’s a patchwork of state laws serving as the legal framework that critics say invites abuse and potential manipulation.