The heavy hand of regulators has been stifling the growth of the cryptocurrency industry in the U.S. and caused innovators to flock abroad. In a bid to mitigate one aspect of this problem, major players have now created a joint system for rating what constitutes a security token.
Uniting Against Regulatory Uncertainty
A group of digital finance companies has announced the formation of the Crypto Rating Council, a member-operated organization created to help market participants comply with U.S. federal securities laws. The founding members of this new industry body are Anchorage, Bittrex, Circle, Coinbase, DRW Cumberland, Genesis, Grayscale Investments and Kraken.
The purpose of the Crypto Rating Council is to provide a joint assessment of whether a specific token should be considered a security under U.S. law. This definition has direct legal implications on companies that trade and manage digital assets in the U.S., but reaching this decision can be costly for any one company as it requires the assistance of expensive lawyers who specialize in such matters. Moreover, as it is a fuzzy legal definition and not a matter of code, different lawyers might reach different conclusions. A joint effort should help companies deal with the lack of clear-cut rules from the U.S. Securities and Exchange Commission (SEC).
Bill Shihara, the CEO of Bittrex, stated: “The Crypto Rating Council’s mission of operationalizing SEC guidance is one that deeply resonates with Bittrex, and me. Today’s regulatory complexity and uncertainty creates a challenging environment for emerging US blockchain technologies. By uniting as a Council to set industry standards and help clarify regulatory guidance, we can reinvigorate responsible blockchain and cryptocurrency growth in the US.”
The Securities Rating Framework
In order to judge whether an asset is a security,