Contemporary business meeting table

A common problem for all cyptocurrency companies in recent years has been the ambiguous characterization and regulation of digital assets. 

During the last few years we have witnessed incredible price swings of not only bitcoin but all cryptocurrencies. Regulators around the world pushed to protect bitcoin buyers but one of the biggest questions still remains unsolved – are digital tokens actually securities? This uncertainty of how they are classified is leaving companies puzzled on how an eventual legislation would affect them.

A huge step forward is the partnership between crypto giants Bittrex, Coinbase, Circle, DRW Cumberland, Grayscale, Genesis, Anchorage and Kraken and their mutual effort in creating the Crypto Rating Council. The main idea of this council will be to determine which digital assets could and could not be sold on their platforms.

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As the group noted, they have designed a “scalable, points-based rating system” that will help in defining which cryptocurrency is a security and which isn’t. The questions that are going to be used in the classification system come “directly from SEC guidance and case law.”

The council was announced yesterday in a blog post by Coinbase. In it, they express the workflow:

“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.”  

Via this system, every digital token will receive a score between one and five. A score of one would mean that the analysis of the council sumbits that this asset has little to no features coherent with a traditional security.

The council commented:

“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.”

For the moment the ratings are as follows:

  • One point – BTC, LTC, and Monero
  • Two points – Ethereum
  • Four points – XRP

Although, this is a very small list the council is planning to include more assets and member organizations in the upcoming months.

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