Crypto Rating Council Deals with Rogue Security Conundrum
The Crypto Rating Council, made up of leading exchanges like Kraken and Coinbase, tries to establish whether existing tokens are securities.
A new Crypto Ratings Council has been established, based on the work and research of leading exchanges and crypto services. The new council will provide analysis for digital assets, while focusing especially on potential status as unregistered securities.
The council was launched with a small group of members, including Coinbase, Anchorage, Bittrex, Circle, DRW Cumberland, Genesis, Grayscale Investments and Kraken. All the exchanges are fully transparent entities that have dealt with the matter of unregistered securities in the past. The exchanges either refrained from listing tokens, or delisted them, after the US Securities and Exchange Commission started scrutinizing ICO projects.
The Council is dealing with the issue of “practical compliance with US securities law”. Despite the fact that the US SEC has offered advisory services, there are still projects with uncertain status.
The Council does not speak outright about which coins are securities for sure, but instead rates them based on probability. Bitcoin (BTC) is something of a benchmark, with a grade of 1, meaning extremely low probability that it is a security. The launch of BTC did not involve fundraising, and there were no promises of payouts that resemble a dividend.
On the other hand, proof-of-stake coins are at risk, especially if there was a fundraising period. Among the assets with the highest rating is Maker (MKR), with a rate of 4.50. EOS, which just came out of a large-scale financial settlement with the US SEC, has a rating of 3.75, a relatively high probability to be deemed a security at least for the period of its ICO.
The position that all tokens from ICOs are basically securities has taken over in the past month, opening up problems for multiple projects. The SEC went after projects that targeted buyers directly, sometimes in a door-to-door fashion, promising high returns. But ICOs that only targeted the crypto community were also caught in the crossfire.