CFTC Commissioner Brian Quintenz has released a statement on March 13, 2018 regarding a proposal by Cameron Winklevoss and Tyler Winklevoss for a virtual commodity SRO. In the statement, the commissioner congratulated the Winklevoss twins and their digital currency exchange, Gemini, for their plan to develop a self-regulatory organization.
SROs are about as free-market as you can get, and it’s refreshing that the US Commodity Futures Trading Commission is voicing words of encouragement for such a plan. According to the CFTC statement, “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.”
Commissioner Quintenz went further to congratulate Gemini in their concept and leadership, and encouraged other market participants, advocacy groups, platforms and firms to promote a quality marketplace within an SRO construct.
The Gemini-backed SRO may be the first of many cryptocurrency groups to develop a set of quality standards for its participants. As with any new market concept or technology, there will be participants who follow a code of ethics, and those who do not. It’s important to avoid pump-and-dump cryptocurrency schemes, and it’s also important to not miss out on great opportunities due to one’s fears.
The reality is that at some point, the CFTC, SEC and other government agencies will develop new regulations. We can expect that such regulations will be based at least in part on the results that come out of any SRO guidelines over the next few years. Until that happens, we may be caught somewhere between self-policing, and disputes over jurisdiction between the various agencies, including the SEC, CFTC, IRS and others. Quintenz vocalized the CFTC’s stance that “bitcoin is absolutely, clearly not a security. It is absolutely a commodity.”
This message of praise comes after Quintenz’s keynote address at the DC Blockchain Summit on March 7th. In his address, he stated, “I believe that a private cryptocurrency oversight body could bridge the gap between the status quo and future government regulatory action.”
Quintenz stated that such self-regulatory organizations could shape the future of regulatory frameworks beyond the US borders. Such a framework could be replicated on a global scale, theoretically to the benefit of investors in every country.
It is unlikely that the CFTC will be directly involved in the creation of the Gemini SRO, or any others, however it could provide guidance based on existing policies related to cybersecurity and other industries.
Gemini published their proposal on the company blog. In the announcement, they stated that Gemini wishes to build the future of money, and that they see “the importance of thoughtful regulation in the virtual currency industry.” Their actions do suggest that they believe in such frameworks, for better or for worse. They are one of the few companies that had the means and desire to buy into BitLicense in New York State, and they’ve entered into an Information Sharing Agreement with the Cboe Futures Exchange (CFE) and the Commodity Futures Trading Commission (CFTC). As part of this agreement, the CFE will perform cross-market surveillance of Gemini’s marketplace, and one may expect that the results of such surveillance would be reported to the related government agencies for further investigation.