In what has been described as a “scalable, points-based rating system”, Coinbase and other crypto big names are collaborating to develop a crypto rating system which will be used to classify cryptocurrencies as being securities or not.
Coinbase And Others Form A Synergy
Other crypto platforms and companies identified to be involved in this innovation are Anchorage, Bittrex, Circle, DRW Cumberland, Genesis, Grayscale, and Kraken. These crypto “big boys” are forming a Crypto Rating Council in order to better decide which digital assets can and cannot be traded on their platforms.
Following the guidance which was directly derived from the SEC, this synergy will put forward metrics according to a set of few dozens of questions in order to filter through the “sea of coins” already available in the crypto markets and use the same results to determine which assets shall be traded on their platforms.
In an official announcement made by Coinbase,
“We also worked hard to focus our framework on objective, repeatable, fact-driven questions that can be answered consistently by technical experts across different assets and over time, …”The result of the analysis is a score which makes it easy for members to synthesize the analysis across many tokens and make their own, independent business decisions about whether or how to support an asset.”
Council Gives XRP The Highest Rating
The first few assets to be considered and rated by the council include Bitcoin, Monero, Ethereum and Ripple’s XRP. On a scale of one to five, Bitcoin (BTC) has been awarded 1 point alongside rivals like Monero and Litecoin. However, Ethereum has scored 2 points while XRP, perhaps the highest rated coin by the council, has 4 points. As the metrics of rating adjust to evolving technologies and unstable market conditions, ratings of coins would adjust accordingly. The council also expressed that more coins and members shall be added later.
“We expect that some ratings will change over time and we will accept and consider feedback from asset issuers when they want to share additional information or clarifications that may impact an asset’s rating,” the group added.
The ratings described above are quite simple and straightforward. A score of one means the council’s independent analysis suggests that the asset has few or no characteristics consistent with traditional regulated security.
Crypto Community Raises Concerns About the Rating System
The crypto community has reacted sharply to this development. Majority of the comments in reaction to the development came as scrutiny and criticism. Popular crypto figure, Larry Cermak weighed in saying that the ranking system creates a massive conflict of interest as rating the vast majority of tokens as non-securities worked in the benefit of the companies.
In my opinion, this rating system creates a massive conflict of interest. All of the companies that joined this consortium are massively incentivized to rate the vast majority of tokens as non-securities. Coinbase listed some very questionable tokens including XRP, Tezos, EOS
— Larry Cermak (@lawmaster) September 30, 2019
Few other crypto influencers supported Larry’s stance. These include Tim Swanson, who commented by saying Larry was 100% correct.
Larry is 100% correct. Nearly 3 years ago Coinbase published a self-serving legal framework that was co-written by Coin Center and USV. after The DAO report from the SEC came out they quietly swept it under the rughttps://t.co/QDH35SGve2 https://t.co/xDDbwMJImV pic.twitter.com/804VgSFFC5
— Tim Swanson (@ofnumbers) September 30, 2019
Others like Nic Carter expressed surprise that the council didn’t regard every of their listed coins and tokens as non-securities. He tweeted –
I’m shocked the crypto ratings council didn’t just give every coin the constituent exchanges had listed a “not a security” rating https://t.co/9S3wbDs4yc
— nic carter (@nic__carter) September 30, 2019
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