Wednesday, March 07, 2018

CFTC Talks to the Chamber of Digital Commerce

By Brad Rosen, J.D.

Chamber of Digital Commerce President Perianne Boring and General Counsel Davine Kim recently took part in a riveting conversation about the chamber and its activities in an episode of the CFTC Talks podcast. The talk centered on the chamber’s mission, the market problem it seeks to address, and where digital assets and Blockchain based technologies might be heading. The interview was moderated by podcast host Andrew Busch, the CFTC’s chief market intelligence officer.

The creation story and organizational mission. Perianne Boring, while an economist at JPMorgan Chase, became intrigued by the decentralized nature of virtual currencies, which led her to engage in a very intense study of Bitcoin and Blockchain technology. It became apparent to Boring this was the most important thing she had ever seen, and she had to become part of it.

This was 2013, the early days of burgeoning cryptocurrency industry, which had a multitude of public relations and legal challenges. In October of that year, the FBI had shut down the Silk Road, a platform used for selling illegal drugs where Bitcoin typically served as a medium of exchange. In early 2014, Mt. Gox, one of the largest Bitcoin exchanges at the time, filed for bankruptcy after its platform had been compromised, and the theft of 850,000 bitcoins belonging to customers which was then valued at more than $450 million.

Amid the chaos, Bore saw an opportunity for the industry to take a step forward, explain itself, and tell other side of the story—a lot of good was also going on in the cryptocurrency space. In July 2014, Bore founded the Chamber of Digital Commerce. The chamber’s mission is to promote the acceptance and use of digital assets and blockchain-based technologies, as well as to develop an environment that fosters innovation, jobs and investment, through education, advocacy and working closely with policymakers, regulatory agencies and industry, according to the organization’s website.

During the interview, Bore further explained that the chamber serves as a dedicated resource in Washington D.C. to talk to policymakers, members and staff on the hill, and law enforcement about the ever-evolving regulatory environment and issues facing the industry.

A flawed system, but with a shining light. “The unique web of oversight does not foster the efficient and effective growth of the industry,” noted Boring. While the CFTC regulates virtual currency futures, the cash market is overseen by multiple agencies at the federal level in connection with anti-money laundering, the Bank Secrecy Act (BCA), unfair, deceptive, or abusive acts or practices (UDAAP), and taxation, according to Kim. Moreover, she pointed out the 50 states regulate virtual currency handlers as money transmitters. Accordingly, an industry participant involved in this space would need to address the licensing requirements and state oversight activities of 50 additional regulators if they wanted to conduct business across the country. Kim noted this is “a flawed system,” adding “the current requirements are too onerous or discordant with what would be considered sound business practices.”

Bore also commented, “We would like to see more coordination between state and federal regulators, and coordination among the various regulators on the federal level as well.” In a positive vein, she noted that the CFTC has been a shining light in trying to advance regulatory solutions. “We wish we could clone Chairman Giancarlo,” Bore remarked. She noted the chairman has been quite helpful in recognizing the opportunity Blockchain technologies present, and noted that he has emerged as one of the beloved figures in the virtual currency industry.

Priorities and a regulatory approach. Establishing the rules of the road in connections with tokens is an immediate priority according to General Counsel Kim. She also noted that we need to determine how best to regulate tokens within each of the avenues they exist, “giving industry runway to grow and identifying points of friction.” Kim sees regulatory changes coming in stages, but sees the need to obtain input from members so as to create a unified and cohesive approach, and that any regulation should be effective, thoughtful, and tailored to support growth.

The chamber is currently engaged in bringing the industry together around best practices for token issues and ICO’s (initial coin offerings). According to Bore, the chamber established the Token Alliance working group in the fourth quarter of 2017, and it now consists of 250 of the world’s leading token and Blockchain experts.

The summit must go on. The chamber will be hosting its the third annual DC Blockchain Summit on March 7 and 8, 2018 in Washington D.C. Commissioner Quintenz is scheduled to deliver the event’s keynote address on the evening of March 7. Quintenz is also a popular figure in the industry, and viewed by the Blockchain community as a constructive voice coming out of the nation’s capital. He recently urged the virtual currency industry to seriously consider a model for self-regulation which was well received. General Counsel Kim indicated that is something the Chamber is looking at closely, but it is no small task given the funding, governance and other issues involved.