At the core of every good company is the desire to protect customers and provide the best customer experience possible. Since their inception, some of the most reputable exchanges in the digital currency space have gone above and beyond to adapt to the rapidly changing standards of compliance, regulation and consumer protection, while providing customers with reliable access to the digital currency protocols that are changing the way we think about finance.
This obviously comes with a lot of challenges. Digital currency exchanges in the US are subject to a myriad of US regulatory requirements (including FinCEN, OFAC, SEC, CFTC, state money transmitter laws and for some, the New York BitLicense), as well as international regulatory regimes. The regulatory framework is constantly evolving and given the novelty of the space, exchanges must adapt quickly to keep up.
But perhaps one of the most important things to note is that while exchanges are subject to many of the same regulatory challenges, every exchange is also different and operates in its own unique way, as Mary Beth Buchanan, General Counsel for Kraken, recently pointed out during her keynote at a Women In Blockchain event in San Francisco. Buchanan explained that it is crucial to remind regulators of this fact and she also highlighted the importance of coming together as an industry to educate the various regulatory bodies overseeing digital currency exchanges.
This positive sentiment for collaboration was echoed by a panel following the keynote, which brought together the minds of remarkable women navigating through the industry’s regulatory framework in the US and around the globe. Panelists included Hailey Lennon (Head of Legal and Regulatory Affairs at bitFlyer), Carla Carriveau (Associate General Counsel at Circle), Nicole Farrar (Associate General Counsel at Coinbase), Christina Spiliakos (Regulatory Head of Lending at Circle) and Roisin Noonan (Regulatory Head of Derivatives at Circle).
During the panel, Hailey Lennon stressed the importance of building relationships with regulators and being part of the conversation. Collaborative efforts that have come from this common goal include the Virtual Commodities Association (VCA) and Blockchain Association. Hailey explained, since its launch that VCA member exchanges; including, bitFlyer, Gemini, Bitstamp, and Bittrex, have worked to develop industry specific working groups that will set standards in various regulatory areas of crypto. Despite the recent guidance from the SEC, industry collaboration on topics like market manipulation, transaction monitoring, and information sharing can work to create a common voice that regulators can respond to.
Nicole Farrar agreed that collaborative efforts are helpful and mentioned that legislative efforts at the state and federal level (such as the recently reintroduced Token Taxonomy Act being pushed forward in part by the Blockchain Association) may provide an opportunity for greater clarity. Currently, we experience dualling levels of regulatory oversight in the USA and this proposed legislation could be a great path forward for the industry.
Everyone is operating under some degree of uncertainty. As Carla Carriveau pointed out, the other panelists may be faced with situations where there isn’t a law or regime that squarely fits the circumstances. But in order to propel the adoption of cryptocurrency and legitimize the ecosystem further, leaders in the space must be proactive in educating regulators and law enforcement agencies of our businesses and technologies, and provide respective businesses with guardrails within which to operate, in the absence of clear, definitive regulatory guidance, as Roisin Noonan and Christina Spiliakos explained. Hailey Lennon also noted that the panel itself represented the value of collaboration, in that it offered the opportunity for participating exchanges to compare and contrast approaches to the space and demonstrated a willingness to share observations and standards.
The event ended with questions from the audience including law students interested in getting into the crypto space and a networking cocktail reception. Thanks to Compliance.ai, Circle and Hogan Lovells LLP for hosting! bitFlyer looks forward to continued collaboration amongst industry leaders.