There is still a lot of confusion regarding what constitutes a security in the digital currency space. BTC and Ether (ETH) are considered not be securities, but other cryptocurrencies are still waiting for regulators to offer some type of guidance. Coinbase believes it has a way to help push the issue along and has created a new Crypto Rating Council (CRC) in collaboration with other exchanges in order to help establish definitions and ensure crypto entities are in compliance with U.S. securities laws.
Coinbase announced the new endeavor in a blog post from yesterday, indicating that it has received support from, and includes as founding members, Bittrex, Circle, Genesis, DRW Cumberland, Anchorage, Kraken and Grayscale Investments. It says that the council is “a member-operated organization formed to assist market participants that trade or support crypto assets to comply” with securities regulations established by the Securities and Exchange Commission (SEC), as well as other regulators.
The CRC has created a rating system that can issue a score between one and five in order to classify crypto projects in accordance with securities regulations. A score of one indicates that the digital asset has no resemblance to a security, as defined by regulators, while a score of five shows that the asset would most likely be considered a security. Coinbase adds that it will be publishing its scores for many assets that are supported by members and points out that classifications could change over time as the asset issuers “share additional information or clarifications that may impact an asset’s rating.”
The platform does not mean that the asset is able to move forward in accordance with established securities regulations – it is not backed by the SEC, the Commodity Futures Trading Commission (CFTC) or any other regulatory body. As such, it is meant to be seen as a mere guideline to be used by asset issuers in order to determine where their projects may stand from a regulatory point of view. However, the ratings are drawn based on information from the regulators, which allow for a certain degree of confidence in the results.
Coinbase adds, “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.”
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