Cryptocurrency industry giants are uniting their efforts to form a Crypto Rating Council – an initiative to clearly define the framework for tokens and securities on the basis of a rating system.
For a long time, the cryptocurrency industry has struggled to come to grips with what constitutes a security. The vagueness surrounding the US compliance for cryptocurrencies has finally caused the industry leaders to join hands and find the much-needed solution.
Top dogs unite for the Crypto Rating Council
On Sep 30, Coinbase blog post announced that who’s who of the industry, which would include the likes of Bittrex, Kraken, Circle, Anchorage and several other prominent names, will become a part of the Crypto Rating Council and assist those in the cryptocurrency assets business to comply with federal securities law in the US.
A clearly defined crypto token can streamline most business operations and prevent companies from crossing the fine line between what makes a token a security, a commodity, or a currency. And if that token happens to fall under the US Securities and Exchange Commission’s (SEC) framework for security, it will have a direct bearing on the registration, licensing and operational obligations of a business. In short, it will drastically change the way a company is supposed to be conducted.
And while SEC is more than considerate to accommodate any queries or clarification in this field, there is no denying the fact that a comprehensive fact-check analysis will help the fledgling business to adhere to a set of explicit guidelines and established players to realign their business strategies.
A comprehensive rating system
Given the legalities and technical complexities involved in establishing this substructure, Coinbase has decided to spearhead this initiative by seeking help from legal and securities law experts for creating a measurable points-based rating system. In the form of several factual questions, the criteria will be based on the SEC’s existing guidelines and laws.
From a scale of one to five, with one displaying little or no resemblance to being a security, thousands of tokens will be evaluated. To offer a perspective, Bitcoin is rated as one on this scale, which implies that it has no similarities to being a security. Likewise, if a token is rated five, it definitely is a security and must, under all circumstances, comply with the SEC’s guidelines for registration and licensing.
At the end of the exhaustive analysis is a score which will help businesses take subsequent decisions regarding their plan of action.
Council board excludes a top industry name
For a constructive initiative such as this, Coinbase has been able to bring in top industry names. However, one shocking omission is Binance, the world’s largest crypto exchange platform by trading volume. Despite its ubiquitous influence over the American traders through its recently launched Binance US platform, Coinbase has chosen to leave out the exchange giant from the council board tactfully.
While some speculate that it could be because the two leading exchanges are always neck and neck, others believe a big fish like Binance has made many enemies along the way and shares a degree of bitterness with other council members.
In the meantime, we are going to have to wait and watch whether the ambitious Crypto Rating Council project will drastically reduce the number of SEC victims in its crackdown on ICOs and cryptocurrency businesses.