They all support developing rules to bolster the industry's credibility and jettison its Wild West image, but there is no consensus on a path to get there, including on issues like creating a self-regulatory organization.
Chicago and New York have long battled for supremacy in financial markets. At stake now are billions of dollars in digital assets, such as bitcoin, and more participation in the industry, which has grown in popularity as the pandemic undercuts major economies and government currencies.
"Whenever everything shakes out, there will be one (regulatory organization) standing that's probably cobbled together from the three or four initiatives that are out there, but for the time being, we are going to push forward with the mindset that (Chicago's) is the one," says Matt Lisle, general counsel at Chicago-based cryptocurrency lender Drawbridge Lending and one of the informal leaders of the Global Digital Asset & Cryptocurrency Association.
The Commodity Futures Trading Commission and Securities & Exchange Commission share authority to thwart fraud and manipulation in the cryptocurrency market, but they don't have general regulatory oversight, except at CFTC-regulated exchanges. CFTC Commissioner Brian Quintenz has encouraged the industry to develop a self-regulatory organization, or SRO-like entity, similar to the Chicago-based National Futures Association, to fill that gap. That would bring more protections for consumers, he says. "I don't think it's a prerequisite to establishing market integrity, but it helps expedite it," Quintenz says.
MORE THAN A FAD
Getting everyone on the same page won't be easy. There are hundreds of cryptocurrencies, and they are decentralized by definition. The distributed ledger technology that underpins most of them hinges on an open international network of computers that collectively track their value.
Cryptocurrencies are turning out to be more than the fad some believe them to be. The pandemic has given new life to the most popular cryptocurrency, bitcoin, which more than doubled in value so far this year. Trading in bitcoin futures contracts at Chicago exchange giant CME Group has also surged, with average daily volumes up 40-plus percent over last year, through May 6.
With its legacy of creating new trading markets, Chicago became a hub for the industry in recent years. While it had setbacks, with some operations shutting down, new ventures have sprung up, including Bitnomial. That cryptocurrency exchange, led by founder and CEO Luke Hoersten, won regulatory approval this year. Accelerator DeFi Alliance also launched this year, with backing from DRW Trading.
DRW's Cumberland cryptocurrency unit supports New York's Association for Digital Assets but is working with multiple groups on a regulatory ecosystem. Cumberland's director of strategy, Brian Melville, says: "We believe having clear, sensible rules is an important and necessary step in the development of this emerging asset class," he says in an emailed statement. "We expect that some associations may merge as the discrete issues they are addressing start to converge."
The Global Digital Asset & Cryptocurrency Association effort grew out of a Chicago event last year sponsored by Fintank, a local fintech booster. With a plug there from then-Mayor Rahm Emanuel, Drawbridge's Lisle joined with K&L Gates attorney Cliff Histed, a former CFTC lawyer, and Gabriella Kusz, a former World Bank executive who has consulted with SROs, to spearhead the Chicago group.
As part of a larger, 16-member committee, they crafted a cryptocurrency industry code of conduct over the past couple of months and circulated it to a broader group of about 40. In developing the code, Lisle says they cribbed from the foreign exchange market. A distinguishing feature of their approach is a related arbitration system that will allow market participants to resolve disputes before a panel of their member peers. "This new group wants to create an SRO with teeth," Histed says.
To lure members, the associations will have to strike a balance between serving the industry's needs and enforcing the rules. Self-regulatory regimes suffer when member conflicts of interest go unchecked.
Kusz emphasizes that the Chicago group is taking a grassroots approach and soliciting input from a wide array of market participants. The New York organizations have cultivated support from a narrower range of interests.
The Virtual Commodity Association was launched by cryptocurrency exchange Gemini Trust, which appointed one of its top executives, Yusuf Hussain, as the association's president. VCA agrees with the need for industry self-regulation and is seeking SRO status, he says. "When regulation is done right it can pave the way to healthy and sustainable markets," Hussain testified before the CFTC technology advisory committee in February. "Regulation is the pathway to building trust and broader market adoption."
The Association for Digital Assets, which also testified before the CFTC committee, is backed by a handful of trading firms and other market participants, such as Cumberland and Hudson River Trading. It doesn't necessarily believe that a self-regulatory organization is necessary and doesn't want to disrupt the market's unique non-institutional aspect, says Brad Vopni, a founding board member of that association and a top Hudson River executive. "It's not a perfectly clear path as to what the optimal outcome is," he says in an interview. For now, he expects the associations will be both collaborators and competitors.
Read more:
- Crypto()Currency - CryptoCurrency.org - April 26th, 2014 [April 26th, 2014]
- Cryptocurrency - Wikipedia, the free encyclopedia - April 26th, 2014 [April 26th, 2014]
- TNW - Stefan Molyneux - Money, Power and Politics The Cryptocurrency Revolution - Video - April 26th, 2014 [April 26th, 2014]
- How to Set Up a Ripple (CryptoCurrency) Generating System! - Video - April 26th, 2014 [April 26th, 2014]
- Bitcoin / Cryptocurrency - An Extensive FAQ - Video - April 26th, 2014 [April 26th, 2014]
- --- The Great Debate --- Bitcoin vs Altcoin @ The CryptoCurrency Convention 4/9/14 - - Video - April 26th, 2014 [April 26th, 2014]
- Bryce Weiner @ CryptoCurrency Convention 4/9/14 - - Video - April 26th, 2014 [April 26th, 2014]
- Popularcoin @ CryptoCurrency Convention 4/9/14 - Joshua Nold - Video - April 26th, 2014 [April 26th, 2014]
- TimeKoin @ CryptoCurrency Convention 4/9/14 - Michael Brown - Video - April 26th, 2014 [April 26th, 2014]
- Infinitecoin @ CryptoCurrency Convention 4/9/14 - Loring Small - Video - April 26th, 2014 [April 26th, 2014]
- Bitcoin Exchange CryptoRush Loses Millions of BlackCoin Cryptocurrency - Video - April 26th, 2014 [April 26th, 2014]
- Brock Pierce, Entrepreneur "FireSide Chat" @ CryptoCurrency Convention NYC - 4/9/14 - Video - April 26th, 2014 [April 26th, 2014]
- [OFFICIAL SPONSOR] Nick Spanos, Bitcoin Center NYC @ CryptoCurrency Convention 4/9/14 - Video - April 26th, 2014 [April 26th, 2014]
- AuroraCoin @ CryptoCurrency Convention NYC 4/9/14 - David Lio - Video - April 26th, 2014 [April 26th, 2014]
- Dogecoin Founder Speaks on the Future of Cryptocurrency - April 27th, 2014 [April 27th, 2014]
- As Bitcoin Soars in Value, Alternative Cryptocurrencies ... - April 27th, 2014 [April 27th, 2014]
- Florincoin @ CryptoCurrency Convention NYC 4/9/14 - Joe Fiscella - Video - April 27th, 2014 [April 27th, 2014]
- DigiByte @ CryptoCurrency Convention NYC 4/9/14 - Jared Tate - Video - April 27th, 2014 [April 27th, 2014]
- Digitalcoin @ CryptoCurrency Convention NYC 4/9/14 - Andrew Davidson - Video - April 27th, 2014 [April 27th, 2014]
- PotCoin @ CryptoCurrency Convention NYC 4/9/14 - Nick Iversen - Video - April 27th, 2014 [April 27th, 2014]
- ZenithCoin @ CryptoCurrency Convention NYC 4/9/14 - Eddie Corral - Video - April 27th, 2014 [April 27th, 2014]
- BitAngels Co-Founder, David Johnson @ CryptoCurrency Convention NYC 4/9/14 - Video - April 27th, 2014 [April 27th, 2014]
- Australian dogecoin founder speaks on the future of cryptocurrency - April 28th, 2014 [April 28th, 2014]
- Coinnext Cryptocurrency Exchange Coming Soon - Video - April 29th, 2014 [April 29th, 2014]
- Cryptocurrency News Round-Up: MtGox Hearing Begins as Bitcoin gets Bloomberg Endorsement - May 1st, 2014 [May 1st, 2014]
- mTrader.org - Cryptocurrency Mining System - Video - May 1st, 2014 [May 1st, 2014]
- CryptoCurrency - cryptobars commodity Launch! - Video - May 1st, 2014 [May 1st, 2014]
- The Mises View: "Taxing Cryptocurrency" | Jeff Deist - Video - May 2nd, 2014 [May 2nd, 2014]
- Coin Pursuit Launches SliceFeeds Interactive Cryptocurrency Network - May 3rd, 2014 [May 3rd, 2014]
- Cryptocurrency | Ground Zero with Clyde Lewis - May 3rd, 2014 [May 3rd, 2014]
- CS 171 Final Project: Cryptocurrency Visualizations - Video - May 3rd, 2014 [May 3rd, 2014]
- Cryptocurrency Explained The Tech Guy 1046 - Video - May 3rd, 2014 [May 3rd, 2014]
- Know How 74 Cryptocurrency - Video - May 4th, 2014 [May 4th, 2014]
- MIT undergrads will each receive $100 in bitcoin - May 5th, 2014 [May 5th, 2014]
- cryptocurrency - Fortune Finance: Hedge Funds, Markets ... - May 8th, 2014 [May 8th, 2014]
- Bitcoin wins US election panel's approval for political donations - May 9th, 2014 [May 9th, 2014]
- CryptoCurrency of the World Unite! - Video - May 9th, 2014 [May 9th, 2014]
- Major Dogecoin Wallet Hacked, Shut Down - May 13th, 2014 [May 13th, 2014]
- Such hack, much sad: Doge Vault reportedly loses $56,000 in heist - May 13th, 2014 [May 13th, 2014]
- BBT Presents: Ode to Cryptocurrency - Video - May 13th, 2014 [May 13th, 2014]
- Scryptify Cryptocurrency Video - Crypto Currency Exchanges - Video - May 13th, 2014 [May 13th, 2014]
- AMD cuts Radeon R9 280 price as inflation woes die down - May 15th, 2014 [May 15th, 2014]
- The Cryptocurrency Certification Consortium - Video - May 15th, 2014 [May 15th, 2014]
- Bitpagar Cryptocurrency - Video - May 16th, 2014 [May 16th, 2014]
- TagPro - Cryptocurrency Juke Session w/ LTB & Counterpary - Video - May 16th, 2014 [May 16th, 2014]
- How to Mine Cryptocurrency Safely - Video - May 16th, 2014 [May 16th, 2014]
- Bunnycoin - Innovative New Cryptocurrency - Video - May 16th, 2014 [May 16th, 2014]
- Jan Irvin on Learning, Statism, Culture, Cryptocurrency and Voluntarism -- Potent News Podcast #1 - Video - May 16th, 2014 [May 16th, 2014]
- Nxt cryptocurrency platform: Proof of Stake mining system - Video - May 18th, 2014 [May 18th, 2014]
- Cryptocurrency Round-Up: Darkcoin Rise Continues; Dogecoin Saved My Life & Bitcoin Explainer Videos - May 19th, 2014 [May 19th, 2014]
- Givecoin.info Announces Partnership with Do A Bit of Good: World's First Charitable Mining Screensaver - May 21st, 2014 [May 21st, 2014]
- Cryptocurrency: Get Mining! - Video - May 22nd, 2014 [May 22nd, 2014]
- Violincoin - The first cryptocurrency for musician - - Video - May 22nd, 2014 [May 22nd, 2014]
- Trollcoin - The Fun Cryptocurrency! - Video - May 22nd, 2014 [May 22nd, 2014]
- Cryptocurrency and Nonprofits with Eric Nakagawa - Video - May 23rd, 2014 [May 23rd, 2014]
- The Cryptocurrency Store - Video - May 23rd, 2014 [May 23rd, 2014]
- The Cryptocurrency Store (Spanish/Espagnol) - Video - May 23rd, 2014 [May 23rd, 2014]
- How To Trade CryptoCurrency: Sign up to a safe and reliable exchange for trading CryptoCurrency - Video - May 23rd, 2014 [May 23rd, 2014]
- UT students to launch cryptocurrency exchange - May 24th, 2014 [May 24th, 2014]
- Videoconferencia Cryptocurrency 201243946 - Video - May 27th, 2014 [May 27th, 2014]
- VideoCharla Jesus Ramos Cryptocurrency - Video - May 27th, 2014 [May 27th, 2014]
- Cryptocurrency Round-Up: Bitcoin Pioneer Dies and Digital Currency's Status in Australia - August 31st, 2014 [August 31st, 2014]
- Bitcoin enthusiasts discuss the cryptocurrency - Video - August 31st, 2014 [August 31st, 2014]
- Make Fast 1.0 up to 10.00 BTC or Any Cryptocurrency REAL CASH - Video - August 31st, 2014 [August 31st, 2014]
- Halcyon cryptocurrency - Video - August 31st, 2014 [August 31st, 2014]
- Selling products / services / fiat money for cryptocurrency - Coinkite PoS Terminal - Video - August 31st, 2014 [August 31st, 2014]
- Selling cryptocurrency to customers - Coinkite PoS Terminal - Video - August 31st, 2014 [August 31st, 2014]
- Cryptocurrency Made Simple - A Plain English Guide to Bitcoins - September 8th, 2014 [September 8th, 2014]
- PotatoCoin - The cryptocurrency for the third world - Video - September 8th, 2014 [September 8th, 2014]
- How To Trade One Kind Of Cryptocurrency For A Different Kind Of Cryptocurrency - Video - September 8th, 2014 [September 8th, 2014]
- How To Fund Your Bleutrade Cryptocurrency Trading Account - Video - September 8th, 2014 [September 8th, 2014]
- How To Open An Account At Bleutrade.com Cryptocurrency Exchange - Video - September 8th, 2014 [September 8th, 2014]
- Cryptocurrency Round-Up: Apple Pay Boosts Bitcoin, Nakamoto Negotiates With Hacker - September 11th, 2014 [September 11th, 2014]
- Qoinpro Cryptocurrency Faucet ok - Video - September 12th, 2014 [September 12th, 2014]
- Weekly Roundup - CEX.IO - Multi-Functional cryptocurrency exchange - Video - September 12th, 2014 [September 12th, 2014]
- TCR #27: Cryptocurrency growth, 9/11 Anniversary, CDC Scandal, Face Your Fears - Video - September 12th, 2014 [September 12th, 2014]
- VanosEnigmA 011 Bitcoin-Comedy BitcoinDog CryptoCurrency-Cat Naughty - Video - September 15th, 2014 [September 15th, 2014]
- WikiLeaks Avoided Bitcoin to Prevent Government 'Destroying' Cryptocurrency - September 16th, 2014 [September 16th, 2014]
- LXC Coin crowdfunds in challenge to Bitcoin - September 16th, 2014 [September 16th, 2014]
- Why Bitcoin Is Poised To Win Big In Las Vegas - September 19th, 2014 [September 19th, 2014]