Gemini’s cryptocurrency ad blitz proves divisive

Despite a lot of movement, bitcoin and regulation are still ideologically oil and water.

• The Winklevoss twins are touting Gemini's regulatory-friendliness in a major advertising blitz
• It's still difficult to identify the practical effects of regulatory-friendliness on how an exchange operates day-to-day
• Blowback may highlight the still-tenuous state of relationships between bitcoin enthusiasts and regulators

Cryptocurrency needs regulation.

That's the sentiment at the heart of the Winklevoss twins' Gemini cryptocurrency exchange's latest advertising blitz on the streets of New York, although it was phrased as "crypto needs rules"...

Okay pic.twitter.com/LzOCGhHJbv

— Anna Baydakova (@baidakova) January 3, 2019

...and "revolutions need rules."

So, it concludes, Gemini is "the regulated cryptocurrency exchange."

For practical purposes

Of course, every cryptocurrency exchange still operating in the United States is regulated, so it might not be the most literally meaningful tagline imaginable. But in accompanying material, the Winklevoss twins explained what it was all about and what they couldn't legibly fit on the side of a bus.

In particular, it might highlight the different scopes of regulation and the willing uptake of different regulatory standards that exist across cryptocurrency exchanges in the United States.

For example, the Winklevoss twins noted that Gemini has adopted a set of marketplace conduct rules modelled off the Cboe futures exchange rule book and has worked with NASDAQ to implement the mainstream exchange's marketplace surveillance technology. Gemini has also proposed the establishment of a marketplace self-regulating crypto organisation, the Virtual Commodity Association – a move that was broadly supported by some high-up regulators in the US.

"This is just the beginning as we plan to continue to engage and work with regulators across the country on both the state and federal level," Tyler Winklevoss wrote. The principle overall is to ask for permission, not forgiveness.

Effects of the cause

But how does a focus on regulation and compliance functionally impact the goings-on of the Gemini exchange relative to other exchanges?

It's difficult to lay this out with complete accuracy given the general opacity of the industry and the lack of comprehensive research to date, but one of the most telling dives into the issue so far might be the New York Attorney General's Virtual Markets Integrity Initiative. It was a survey of crypto exchanges operating in New York and is likely to be one of the clearest ways of comparing different high-regulation cryptocurrency exchanges next to each other.

On the whole, it does suggest that Gemini is walking the talk to a large extent. The report gives a nod to Gemini's acceptance of NASDAQ market surveillance systems but also acknowledges that other exchanges are doing the same thing.

It also gives Gemini a mention for its policy of requiring employees to regularly disclose their crypto trading activity, but notes that Bittrex still goes further by restricting employee trading to a two-day window each quarter.

In a nutshell, it might suggest that the majority of exchanges – at least those operating in New York – are voluntarily operating to a high regulatory standard. Although the report wasn't without criticism and did mangle some of its findings.

That there might functionally be little difference in compliance-happiness between the top exchanges may give weight to some criticisms of Gemini's ad campaign.

This may be the single worst ad campaign I’ve seen in a decade in FinTech...

“@Gemini: The REGULATED Cryptocurrency Exchange”

For what human walking the streets of NYC is that *the* value prop you want to hang your hat on?

Perhaps 1 out of 1,000 people? pic.twitter.com/Lart60Olx2

— Mike Dudas (@mdudas) January 6, 2019

Tough crowd

Many of the more crypto-rebellious took special umbrage to the campaign – although perhaps anarchists are by definition tough to please.

"Crypto has lots of rules already. Crypto IS rules. These rules are stronger than any political inscriptions; they are objective, open and knowable to all parties, they transcend borders, and they are enforced by mathematics," ShapeShift CEO Erik Voorhees argued. Many others agreed with the sentiment.

It's an ongoing debate, but on the whole it seems inevitable that cryptocurrency will be subject to regulations. The Financial Action Task Force and many other regulatory bodies have said as much, so the big question might be what form it will take.

The other big question is probably the extent to which cryptocurrency can functionally be regulated. As a decentralised technology, it's naturally much more difficult to crack down on than centralised systems, and to a certain extent, it's not possible to prevent misbehaviour in the space.

In the long run, the key might be smart regulation that the industry can willingly adopt because it's helpful and because it adds value to the space. In that respect, it's probably a good thing for industry bodies to look at taking an active role in the developments.

On the other hand, it's typically more entertaining to follow the more resistant industry figures including Erik Voorhees and whoever pens Kraken's official statements.

Crypto explained

Picture: Shutterstock