Crypto Rating Council Formed By Coinbase, Kraken And Others

Group, News | October 1, 2019 By:

Major cryptocurrency firms have joined forces to create a new organization that would assist market participants that trade or support crypto assets to comply with US federal securities laws.

Called Crypto Rating Council, the new member-operated organization includes Coinbase, Anchorage, Bittrex, Circle, DRW Cumberland, Genesis, Grayscale Investments, and Kraken. The goal of the council is to create a scalable, points-based rating system centered around a set of several dozen, yes / no factual questions, which are derived directly from SEC guidance and case law. These questions are also designed to address important characteristics that inform whether an asset is or is not a security.

“Whether a token is a security under US federal securities laws, in particular, will significantly impact registration, licensing, and operating obligations for financial services firms that offer crypto services like exchange, investment management, or trading,” the council said.

According to the organization, the council’s analytical framework results in a score between 1 and 5. A score of 1 means the Council’s independent analysis suggests the asset has few or no characteristics consistent with a traditional regulated security. A score of 5 means the Council’s analysis suggests that an asset has many characteristics strongly consistent with treatment as a security.

“Coinbase is proud to bring together many of the largest and most credible companies in the cryptoeconomy to implement the first industry wide crypto rating system,” said Chief Legal Officer Brian Brooks. “Like the Motion Picture Association’s system for rating movies, this new system will provide clarity and a common language for assessing important aspects of individual cryptoassets—in this case, securities law compliance.”