Coinbase, Others Form ‘Crypto Rating Council’ to Indicate Crypto Securities Violations
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Coinbase, Others Form ‘Crypto Rating Council’ to Indicate Crypto Securities Violations

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In a blog post published September 30th, 2019, Coinbase announced the launch of the ‘Crypto Rating Council’. Coinbase will work with seven other firms to provide a 1-5 rating which assesses how likely a digital asset is to violate U.S. securities laws. 20 cryptocurrencies have already been assessed.


Coinbase’s Crypto Rating Council Explained

The U.S. Securities and Exchange Commission (SEC) has continued to show increased enforcement targeting digital assets which violate federal securities laws.

In fact, SEC Chairman Jay Clayton has stated on numerous occasions that virtually every digital asset with an Initial Coin Offering (ICO)— minus Ethereum— has violated such laws.

In the midst of such an atmosphere, Coinbase has teamed up with seven other companies to launch the Crypto Rating Council. The organization will provide a rating scheme to indicate the likelihood an asset will be deemed a security, according to U.S. securities laws.

The other firms include Anchorage, Bittrex, Circle, DRW Cumberland, Genesis, Grayscale Investments, and Kraken.

Here’s how it will work: each digital asset which is listed on one of the council’s exchanges will be assessed. The asset will receive a rating between 1-5. A ‘1’ will constitute an asset with little-to-no features of a security, while a ‘5’ would reflect something similar to the SEC’s definition of a security.

So far, 20 assets have been rated.

Bitcoin (BTC) received a 1, while XRP, maker (MKR) and Polymath (POLY) all received a 4 or higher.

The ratings are based on SEC guidance, previous case law, and the legal and technical experience of the companies which comprise the council.

Coinbase’s Chief Legal Officer Brian Brooks told CoinDesk that ratings of 5 would not be disclosed.

According to Brooks,

“Since a 5 rating indicates that the asset can only be listed on a registered securities exchange or ATS, by definition those ratings wouldn’t be published because the relevant assets aren’t listed by any member.”

Coinbase warned however, that all ratings are liable to change, and they do not constitute investment advice.

Following the remarks of Chairman Clayton, ICOs have plunged. Companies looking to raise capital while leveraging the benefits of blockchain technology have subsequently turned to the Security Token Offering (STO) as a regulatory-compliant alternative.

What do you think of the Crypto Rating Council? We want to know what you think in the comments section below.


Image courtesy of Pixabay.

September 30, 2019

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Tim Fries Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firms specializing in sensing, protection and control solutions (IoT).