Tyler and Cameron Winklevoss, who are the founders of Gemini, a crypto-trading exchange have launched a proposal for establishment of a Virtual Commodity Association. This will be a regulatory entity specifically for the cryptocurrency markets and tasked with promoting efficiency, price discovery and transparency by adopting the acceptable industry standards.
Some the things that the organization will introduce are rules-based markets, information sharing and strong surveillance systems to the which is characterized by workings that are largely hidden from government and public scrutiny.
Many players in the crypto market have received this proposal with a lot of caution. Zen Cash founder Rob Viglione said the industry is ailing from lack of transparency, ethics and clearly defined rules that can guide participants. Zen Cash is a cryptocurrency. A combination of a free-for-all business environment and an opaque technology has led to attracted harsh reactions plus extreme statements from government regulators and economists. Viglione says government regulatory agencies may over react basing on egregious behavior exhibited by many cryptocurrency exchanges.
If rules are introduced, they may lead to some tangible benefits for SROs. For instance audits and minimum capital requirements can help build trust and prevent bankruptcy. Many of the cryptocurrencies exchange with Tether and fiat currencies. Tether is a coin, which trades at parity with the U.S dollar and also maintain some amount of fiat currency in the bank account to act as backing.
According to Rachel Lam, the vice president of regulatory strategy at Polymath, exchanges which interface with fiat have the risk of complete insolvency or liquidity crises. Polymath is a startup which specializes in providing services for offering security tokens to companies.
A self-regulatory organization can help in preserving the innovations of the ecosystem with the digital currency market. A big portion of the cryptocurrencies investments are made basing on future growth expectations of the underlying protocols. Many of the problems witnessed recently, whether they are related to spiraling transactions fees or a slowdown in transaction speeds, have only increased the need for more research protocol. Government regulations may stifle innovation efforts because of the several innovation rules.