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Crypto Exchanges Establish Digital Asset Ratings Agency

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A group of cryptocurrency exchanges have banded together to create the Crypto Currency Council, aiming to bring some much-needed clarity to the regulatory rules surrounding the trading of digital assets.

The proper legal characterisation of a crypto token — as a currency, a commodity, a security, or something else — can have a meaningful impact on how crypto businesses operate and their regulatory obligations.

Led by Coinbase, with support from Anchorage, Bittrex, Circle, DRW Cumberland, Genesis, Grayscale Investments and Kraken, the Council will apply a points-based rating system (from 1 to 5) drawing on SEC guidelines to inform whether an asset is or is not a security. A score of 1 means the Council’s analysis suggests the asset has few or no characteristics consistent with a traditional regulated security.

The creation of the body has met with generally positive support from across the industry, although some question the narrow nature of the founding members.

Alex Lam, co-founder and CEO of RockX, a new digital asset services platform, says: “Due to the nature of the founding bodies, there may be a number of challenges to the Council’s long term success. In particular the potential conflict of economic interests between the exchanges involved, as well as the projects analysed, may raise the question of how, and for how long, can this institution achieve its objectives.”

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Fran Strajnar, CEO and Founder of Brave New Coin, adds: “It would be encouraging to see non-industry players such as international law firms, banks and traditional financial institutions join the ratings council. This would provide a more objective and grounded perspective on how regulators might challenge and approach the crypto asset space.”

The Council says it intends to broaden its membership in the coming months and deliver similar ratings tools for products from non-US jurisdictions.