In light of the QuadrigaCX incident, an organization, the Crypto Action Task Force (CATF), is coming together in an effort to build a ‘code of conduct’ for businesses operating in the blockchain industry.
“We want to aggregate the common practices we use every day as the largest organizations & people that have been here the longest.”
The CATF plans to build a framework outlining structure, standardization, and common practices crypto exchanges should be following. The organization is looking to gather input from businesses, leaders, and experts in the cryptocurrency space in Canada, as well as around the world. Canada does not currently have an existing regulatory framework surrounding cryptocurrency exchanges.
Shyft Network is one of the companies that helped launch the task force. Co-founded in 2017 by Canadian entrepreneur Joseph Weinberg, Shyft, which is based out of Barbados, is developing a blockchain-based platform that allows users to share private data in a secure manner.
“It’s not about creating regulations that everyone else in the space has to abide by, because the word ‘regulation’ is a very strong one,” said Weinberg, the lead of CATF and co-founder and CEO of Paycase. “We want to aggregate the common practices that we use every day as the largest organizations and people that have been here the longest.”
The Quadriga incident left a “big, unfortunate stain” on the industry, Weinberg said, also pointing to the Mt. Gox scandal from 2014, where a hacker stole approximately 850,000 bitcoins, (then valued at $450 million USD) from the platform’s hot wallet.
Weinberg said that what the cryptocurrency industry needs to do is lead by example, and prove to the world that it is mature enough to communicate, collaborate, and build standards over the mid-to-long term. He warns that if the industry doesn’t write its own rules, then people who don’t understand the space will write it for them.
“One thing I’ve learned is that if we aren’t the ones involved in the conversation, the conversation is being had without us and it means that what they’re trying to do is not based on experience.”
A proposed code of conduct
The CATF said the code of conduct is still in the works, and that it is currently working towards recruiting global cryptocurrency exchanges and industry leaders to be involved in the project.
“It’s less for the industry on how we operate,” Weinberg explained. “It’s more so about how we better project the message of what the proper way of doing things is to consumers and to incoming people involved in mass adoption.”
Weinberg mentioned that since the crypto space is complex, leaving this to regulators unfamiliar with the industry, could end up with over regulating or regulating areas that don’t need attention.
“[It’s] about how we better project the message of the proper way of doing things.”
Whether the CATF chooses to work with government bodies in establishing a framework or code of conduct is up for discussion. Weinberg said that a universal framework is needed now, before regulations are written differently in every country, “and then you have a huge mess.”
“The intent is to say ‘we are here to help.’ We can’t tell governments what to do,” Weinberg said. “It ultimately comes up to their willingness to come up to the ecosystem to ask for help.”
Over the next month, the CATF will be focused on building an action plan regarding how the framework will work. Weinberg said the goal is to bring in business leaders that are close to Canada, but more importantly, dedicated to the cryptocurrency space, to help build standards and address problems that are affecting consumers.
More education could have prevented Quadriga
QuadrigaCX, based in Vancouver, had formerly been one of Canada’s largest crypto exchanges. The exchange faced ruin when the CEO, Gerald Cotten, died and the company lost access to $250 million in cash and cryptocurrency.
Weinberg said that Quadriga, while tragic, should have been completely avoidable. He maintains that if businesses in the crypto space communicated the correct way exchanges should have been behaving, the Quadriga disaster might have been prevented.
“We never held any money on [Quadriga’s] exchange,” he said. “Ever. And I would have never done that on Quadriga because I could see, the whole time, that those transactions were nefarious. There are no cold wallets. There never was,” he argued.
BetaKit has previously reported on the ever-evolving Quadriga debacle. In the past, it was revealed that Quadriga was storing about $190 million in cryptocurrencies in cold wallets, however, auditors at Ernst & Young found that these wallets have remained empty since April 2018.
“If you knew what Quadriga was doing, how they were operating, you would have never put money into it.”
Last month, crypto and blockchain lawyer, Michael Stephens, spoke to BetaKit about what regulations could have prevented Quadriga. He noted that lack of federal regulations made it easier for a company like Quadriga, which was registered in BC, to get away with some things, especially since it wasn’t considered a securities marketplace.
Stephens said, “It has always surprised me that there really isn’t any sort of governing body for [crypto] exchanges.” He noted that “because there are no standards, or codes of conduct, or regulatory framework for these types of companies to fit into, companies like Quadriga are capable of being run poorly.”
Weinberg expressed his belief that organizations like CATF need to step up to address these issues.
“If I’ve learned anything about building regulations in other countries the last year and a half, it’s that if we don’t stand up now, the government is going to act because they have to, it’s their job,” he said.
Blockchains and open public networks are built to be transparent. Weinberg emphasizes the importance of having a framework that can be easily understood and helps the public to better understand blockchain and cryptocurrency platforms so they can then, in turn, hold companies accountable. He adds that it’s not supposed to be about insider information, people just need to understand what to they are looking at.
“If you knew what Quadriga was doing and how they were operating, you would have never put your money into it,” said Weinberg. “I think that is largely a responsibility for us, as early adopters and business leaders to at least come together and say ‘these are the common practices and these are what consumers and regulators need to understand how we operate.’”
Featured image via Pixabay.