I’ve mentioned the importance of regulatory clarity in the cryptocurrency space multiple times in the past, there’s been many ups and downs over the last eighteen months involving lawsuits against ICOs and even some companies in the space, Kik is an evident example of this.
It seems now that some of the biggest firms in the cryptocurrency industry are working together to provide a level of guidance and clarity.
Meet the Crypto Rating Council, the council consists of a group of well-known cryptocurrency financial firms, Coinbase, Kraken, Circle (owns Poloniex), Bittrex, Grayscale and several others.
“We formed the Crypto Rating Council to create a framework to consistently and objectively assess whether any given crypto asset has characteristics that make it more or less likely to be classified as a security under the U.S. federal securities laws.” – Crypto Rating Council
The purpose of this council is to asses and set guidelines on the legal status of digital assets through compliance tools, matching their characteristics against the requirements of a Security using laws set by US regulators, using a rating of one to five, the higher the number the more likely the respective asset could be deemed a security by regulators.
“A score of 1 means the Council’s analysis suggests the asset has few or no characteristics consistent with treatment as a security under the U.S. federal securities laws.
A score of 5 means the Council’s analysis suggests that an asset has many characteristics strongly consistent with treatment as a security.” – Crypto Rating Council
As the Coinbase Blog announcement and Council’s website states, the ratings are not influenced by the SEC, or any government authority. Regulators often use the Howey test to decipher the status whether something matches the criteria of a Security.
What Are The Council’s Ratings Of The Biggest Cryptocurrencies?
Providing compliance tools, the Council aims to help other businesses avoid Securities violations, ‘asset ratings’ made by the Council are not fixed and can change in the future.
Bitcoin, Litecoin and Monero scored the lowest scores with 1/5, Ethereum and Zcash came close with 2/5.
EOS, Stellar and new coin on the block, Hedera Hashgraph (more on this in a future post) were rated above 3/5, this is likely due to their ICO periods.
With the highest score at and above 4/5 is XRP, Polymath and Maker. The scoring of 4/5 is being highly disputed by the XRP community, with even Binance CEO, CZ himself taking to Twitter to share insights and thoughts.
Interestingly Binance and Ripple, both arguably huge influencers in the Blockchain and cryptocurrency industry are not part of the council…
The Council’s ratings do not carry legal status but this move highlights the rapid maturity of the emerging cryptocurrency sector, it also shows compliance with regulators and gives businesses and investors clarity on the legal status of cryptocurrencies.
This is not investment advice; please always do thorough research and only invest what you are willing to lose, especially in times of uncertainty.