Coinbase & Kraken Have Created a New Crypto Rating System
October 2, 2019
The question of whether a cryptocurrency can be categorized as a security or not can have a significant influence on the fate of the project. To comply with the SEC, Coinbase and Kraken have created a Crypto Rating Council that will rate projects on a scale of 1 to 5, with the highest value categorizing the cryptocurrency as a security.
Two cryptocurrency exchanges who are based in the US, Coinbase and Kraken, decided to launch a joint rating system that will define certain digital assets as securities. According to a report published on the 30 September by the Wall Street Journal (WSJ), the exchanges formed a ‘Crypto Rating Council’ that will determine which assets can be traded without the supervision of regulators.
Besides Coinbase and Kraken, there are several other members of the group, including Bittrex, Circle Internet Financial, Genesis Global Trading, DRW Holdings’ Cumberland unit, Grayscale Investments, and Anchor Labs. The report claims that the group will be expanded in the future with several other members.
A new crypto rating system to impress the SEC
The crypto rating system, which will define certain assets as securities, proposes a 1 to 5 scale where cryptocurrencies rated as a 5 are categorized as a security and cannot be sold, trader, or issued by unregulated firms.
For example, the Crypto Rating Council rated Bitcoin at 1, stating that it is not a security and that it can be freely traded.
The creator of the rating system is Brian Brooks, the chief legal officer at Coinbase. Brooks claimed that the question of whether a certain asset is a security or not is one of the greatest questions in the sector.
Meanwhile, the general counsel at Kraken Mary Beth Buchanan stated that she is optimistic that the U.S. Securities and Exchange Commission (SEC) will see the strategy conceived by the Crypto Rating Council as a positive next step in the sector. Furthermore, she claims that the council’s aspiration will show regulators that the exchange is decisive to provide help with the classification of assets.
Interestingly enough, a significant portion of the Crypto Rating Council’s members are also a part of the Blockchain Association, which actively lobbies for a House bill that would remove the potential jurisdiction of the SEC on a significant number of cryptocurrencies.
Raphael is an avid crypto-enthusiast and follows the latest developments in the blockchain industry closely. He has been writing crypto news articles for the better part of five years now and started writing for CryptoRitter in 2018.