The Association of Digital Asset Market (ADAM) is a conglomeration of different types of US companies with different business models in the digital asset industry. One year after its inception, the association has come up with a code of conduct for the cryptocurrency market.
The trade alliance has also grown its membership up from 10 to 15. The five more companies include; custodians BitGo and Anchorage, trading firm and VC investor CMT Digital, lender BlockFi, and prime brokerage Tagomi.
Launched on Tuesday, the draft is a major step in the endeavor by institutionally-focused companies to make the industry credible as it has been viewed by traditional investors and regulators as a digital Wild West.
‘The digital asset industry has had a rocky first decade. Crypto investors have learned all the hard lessons of a century’s worth of financial crime and scandal in ten years,’ said Dan Burstein, the general counsel and chief compliance officer at the Paxos exchange, one of the group’s 10 founding members.
‘There has not been a lot of transparency. Investors don’t always know what’s a reliable place to conduct their trading.’
Through the code, the situation can be corrected. It sets standards for governance, ethics, transparency, fairness, compliance, risk management, information security, and business continuity. Besides, it prevents conflicts of interest, market manipulation, money laundering, and terrorism financing.
For instance, according to the draft, ADAM members should ‘be truthful in their statements, use clear and unambiguous language, make clear whether the prices they are providing are firm or indicative, and provide to clients and counterparties all material information about business relationships.’
‘As digital asset markets become ever more enmeshed in capital markets, it is important to level the playing field and establish the high standards and operating protocols deserving of this promising and innovative asset class,’ said Philippe Bekhazi, CEO of XBTO Group, ADAM founding member, during a press release.
The draft will be circulated to its members for feedback after which they are expected by ADAM to sign a final version of the code in early next year.
What happens to violators of the code?
Member companies found to breach the code are to face elimination from the association. This is so even though the code is not a regulatory document. ADAM hopes also that the violators would have lost what will become a strong endorsement in the digital market.
‘Being associated with ADAM is a signal to investors, business partners and regulators that you are making an effort in good faith to live by certain standards,’ Burstein says.
‘We can’t be too prescriptive. Instead, it took a higher-level principles-based approach setting general guidance rather than narrow rules,’ Burstein explains on ADAM’s inclusion of companies with different business models.
‘The idea is not to tell people what they should be doing at all times. We are after all in an innovation industry,’ he adds.
ADAM is not the first in the evolving crypto industry. Global Digital Finance(GDF)-a London based trade group- with 70 members launched its Code of Conduct last year.
The code consists of 15,000 words divided into eight separate pdf files different from ADAM’s which has less than 4,000 words in a single 12page document.