In past years, the crypto industry as a whole has had difficulty characterizing and regulating different crypto offerings as a result of their extreme volatility and the debate about whether or not they are securities. The solution? Some of the world’s biggest names in crypto have come together to better determine what crypto will truly be defined as in the finance industry.
In past years, the crypto industry as a whole has had difficulty characterizing and regulating different crypto offerings as a result of their extreme volatility and the debate about whether or not they are securities. The solution? Some of the world’s biggest names in crypto have come together to better determine what crypto will truly be defined as in the finance industry.
While many of the most significant assets have been evaluated, the council plans on adding more assets over the coming months and developing systems for those outside of the United States.
Crypto Giants Kraken, Anchorage, Circle, Genesis, DRW Cumberland, Bittrex, Coinbase, and Grayscale have now developed the Crypto Rating Council to come to a conclusion about which assets can and cannot be traded on their platforms.
To draw these conclusions, the council has created a scalable, point-based rating system that utilizes questions stemming directly from the SEC and related case law. Using this system, they can then determine whether or not a given asset qualifies as a security or does not meet these expectations.
The system works by giving digital currencies a rating on a scale from one to five. The lowest end of the scale represents cryptocurrencies and digital tokens that have little to no relation to traditional securities.
Coinbase spoke about the council and their system in their blog, stating:
"We also worked hard to focus our framework on objective, repeatable, fact-driven questions that can be answered consistently by technical experts across different assets and over time. The result of the analysis is a score which makes it easy for members to synthesize the analysis across many tokens and make their own, independent business decisions about whether or how to support an asset. We expect that some ratings will change over time and we will accept and consider feedback from asset issuers when they want to share additional information or clarifications that may impact an asset’s rating.”
As of right now, some of the ratings have currently been posted. Cryptocurrencies that fall into the lower end of the scale include Bitcoin, Litecoin, Monero, and Ethereum, for which the first three received a rating of one while Ethereum received a two on the scale. Meanwhile, cryptocurrencies with stronger positions like Ripple received a higher rating. In this case, Ripple received a four out of five.
While many of the most significant assets have been evaluated, the council plans on adding more assets over the coming months and developing systems for those outside of the United States.
