With an uprising of the cryptocurrencies, the debate about their legal status and whether or not they fall under the securities law of the United States of America has been hot. This has been a major concern for financial services that are willing to expand their support for the digital tokens but the complications circling the legal status and related securities law strengthen their reluctance.
Coinbase, Circle, and Kraken To Form A Crypto Rating Council
In an attempt to resolve such concerns and take a step closer to a new age of cryptocurrencies, exchanges like Coinbase, Circle, and Kraken have recently announced that they have decided to join hands to establish an all-new organization by the name of Crypto Rating Council. As the name suggests, the council will rate the digital tokens that will help accentuate the legal status as well as their resemblance with U.S securities. The council will work closely with the Securities and Exchange Commission and use its guidance to meticulously rate the digital tokens.
How Would The Council Work?
The announcement was first made on Monday by Coinbase via a blog post. It highlighted that the council will play a crucial role in determining if the U.S securities law is applicable to a digital token under discussion. Access to such information will help businesses make independent decisions about adding support for a given cryptocurrency.
As per the information revealed thus far, a scale of 1 to 5 will be used to rate the digital tokens. A rating of “1” would suggest that the digital token has minimal similarity with the securities, while a rating of “5” would hint towards the maximum likelihood of a digital token to be subject to the U.S securities law.
XRP Entitled As A “Security
A few of the other prominent names that have come forward as the members of the council include Genesis, Bittrex, Grayscale Investments, Anchorage, and DRW Cumberland. The initial proceedings of the Crypto Rating Council have reported Bitcoin and Litecoin to have insignificant similarities with securities. According to the experts, such cryptocurrencies are rather more comparable to commodities like oil or gold. Ripple (XRP), on the other hand, that has recently been gaining popularity among the investors has been entitled as a “security” and subjected to the related laws and regulations in the United States of America.
Whether or not this legal status for XRP is going to hold will be revealed in time. For now, however, there have been reports of a protest from the current CEO of Ripple who has made his stance clear in favor of the XRP “NOT BEING” a security. Coinbase has responded gently to the CEO’s concern and has stated that upon reception of further information and clarifications, the legal status of an asset may change with time.