Eight blockchain companies, including cryptocurrency exchanges Coinbase and Kraken, have formed the Crypto Rating Council and developed the first system to rate crypto assets on their likelihood to “be classified as a security under the U.S. federal securities laws.”
Bitcoin, DAI, Litecoin and Monero have all received a score of 1.0 out of 5.0 which means that these cryptocurrencies have “few characteristics that are consistent with the Howey-test factors” and are very unlikely to be classified as a security. Ethereum is viewed slightly more favorably and got a score of 2.
The highest scores in the current rating are held by Maker (4.50) and Polymath (4.50) due to a number of reasons, including “marketing of the token suggesting an opportunity to earn profits” and “sale of tokens or token interests prior to the existence of token utility.” The second highest score went to XRP (4.00) which uses “securities-like language.” The high score means that these assets are “probably more likely, relative to lower-scored assets, to implicate the U.S. securities laws.”
The Crypto Rating Council has been structured as a membership-based organization that unites founding members of Genesis, Coinbase, Kraken, Grayscale, Circle, Cumberland, Bittrex and Anchorage with the goal of providing transparency to the market by holding cryptocurrencies up to current US laws.
“The founding members formed the CRC to create a compliance tool which, in partnership with securities law experts, allows the members to consistently review assets supported in the ordinary course of their respective businesses.”
In the future CRC is planning to “publish a simple rating for most assets it reviews to indicate the results of its analysis as a reference for operators, developers, and the public.”