Crypto Exchanges Create Working Body to Bolster Bitcoin Trading Market and Increase Credibility

Cryptocurrency exchanges are taking a page from successful stock markets, forming a working group to oversee the unregulated digital asset exchange space, according to Business Insider.

Create the New Financial Market

While it isn’t confirmed, the logical sequel to such a working group is the formation of a self-regulatory body or a “virtual commodity marketplace.”

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According to an official press release, the effort is spearheaded by the Winklevoss twins, owners of Gemini Exchange, and includes Japan’s Bitflyer, the U.S.’s Bittrex and Luxembourg’s Bitstamp.

Dubbed the Virtual Commodity Association (VCA), the group collectively handles tens of billions in the daily traded volume of the cryptocurrency market.

Bitstamp CEO Nejc Kodrič said industry players value self-regulation, which was earlier centralized in Europe but has since shifted to a regulatory perspective.

Kodrič added:

“Those that can’t or won’t comply with regulations put consumers–and their own operations–at risk.”

Weak Government Links for Now

Meanwhile, cryptocurrency industry observers noted the absence of Coinbase in the VCA consortium, given the San Francisco-based exchange’s historic adherence to government regulations and consumer safety.

Interestingly, Coinbase has proven to have deep relations with the U.S. government–a feature not enjoyed by other U.S-based exchanges. Most recently, U.S. regulators rejected Gemini’s attempt to launch Bitcoin ETFs to the institutional cryptocurrency market.

However, the VCA has a solid government connection in the form of its Executive Director Maria Filipakis, who previously served as the executive deputy superintendent at the New York Department of Financial Services (DFS) and formed the initial regulatory drafts and regulations for virtual currencies.

VCA Sets Tasks

As stated in the press release, the VCA aims to achieve the following tasks:

  • Membership Guidelines for inclusion in the VCA.
  • Creating a robust marketplace for promoting fairness, transparency and risk management in the cryptocurrency sector. Also, augmenting liquidity for market participants.
  • Addressing “best practices” to resolve member conflicts, creating succinct client communication, record keeping and safety of disclosures.
  • Staffing the VCA and maintaining the composition of the board of directors.

Bittrex’s chief compliance officer, John Roth, highlighted that the VCA could help “advance our shared goals of improving transparency, accountability and security across all virtual currency trading platforms.”

Roth also added the consortium helps create a unified dialogue with regulators and another legislator while developing a long-term solution for ensuring compliance and innovation in the blockchain and cryptocurrency sector.

Only for Institutional Appeal?

While the move borders on the extraordinary, industry analysts remain conflicted over the VCA’s move: Does it exist for protecting retail investors or merely appealing to institutional investors?

Several reports suggest financial institutions and big-name banks are waiting on the sidelines to enter the cryptocurrency market, primarily due to a lack of regulations and an absence of an operational framework.

Additionally, the lack of robust and unified data is missing from the cryptocurrency trading sector, a point industry analysts believe could form an agenda for the VCA. Dave Weisberger of CoinRoutes, a cross-platform trading tool, spoke in this regard:

“Institutions are genuinely skeptical today over the fairness and data quality in the crypto market. Tere is a lot of concern over the quality of the exchange data we aggregate as well as underlying manipulation. An industry SRO is a great start towards ameliorating those concerns.”

Weisberger has a clear case. In 2017, the CBOE inked a partnership with Gemini to utilize the latter’s data feed for determining its Bitcoin derivative and indices pricing.

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