Obscure SEC Guidance? No Problem as Crypto Industry Self Regulates

The lack of clarity regarding which cryptocurrencies qualify as ‘securities’ under U.S laws has prompted leading businesses in the country to develop their own points-based rating system.

Announced on Monday by crypto exchange Coinbase, the rating system was developed by a new Crypto Rating Council (a member-operated organization) founded by Coinbase, Circle, Grayscale, Genesis Capital, and a few other U.S crypto-related businesses.

The rating system reportedly drew insights from a recent guideline published by the U.S Securities and Exchange Commission (SEC) regarding when or not a token should be labeled security.

However, the research, according to today’s announcement, is performed independent of regulatory oversight, a standing which means that it is not binding as legal advice, nor endorsed by any U.S regulator.

Crypto Rating Council Format

Writing on how the new Crypto Rating Council would formulate its ratings for tokens, the announcement noted that it would rely on “factual analysis performed by outside legal experts in conjunction with technical experts at member firms.”

Each asset under review would get a score between 1-5, with the lowest number meaning that the asset is likely not security, while the higher number means that the asset has many characteristics strongly consistent with other regulated securities.

Coinbase, which appears to be the premier leader of the new organization further acknowledged that some ratings would change over time if asset issuers have “additional information or clarifications that may impact an asset’s rating.”

Conclusively, the exchange expressed confidence that more U.S crypto firms would join their newly formed organization in what is ultimately a move to self-regulate the industry with the supposed helpful guidance provided by the SEC.

In a recent related development, Coinfomania reported that Ripple CEO, Brad Garlinghouse wrote to the U.S Congress, requesting that lawmakers quickly move to provide clear guidance for the emerging ecosystem or face an increased number of projects moving overseas where their activities are welcomed.

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