New Digital Asset Rating System Revealed

Hottest New Crypto Listing On Major Exchanges
Hottest New Crypto Listing On Major Exchanges

New Digital Asset Rating System Revealed

By Benson Toti - min read
Updated 21 March 2023

A new system that provides digital asset rating figures has been unveiled. This idea was developed by the Crypto Rating Council.

It will allow users to see at a glance whether a particular token is likely to come under U.S. securities law. This follows on from previous debates about whether digital coins should be governed by the same laws as securities. How does this new concept work and who is behind it?

Digital asset ratings include SEC input
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How a Digital Asset Rating Is Calculated

Each asset will be rated on a scale of 1 to 5. The higher the number, the closer it is to a security. Expert input from the Securities and Exchange (SEC) commission has been used to help create theses ratings.

How will this work? An example works shows that Bitcoin (BTC) and Litecoin (LTC) probably won’t fall under security laws. On the other hand, they have classed Ripple (XRP) as being much more like a security.

Why is this important? Unregulated cryptocurrency operators can’t sell or trade securities. Exchanges can use the digital asset rating list to decide which tokens they can safely offer. The increase in the number of firms offering cryptocurrencies has made this increasingly important.

Who Are the Crypto Rating Council Members?

A number of leading crypto businesses make up this Council, including a few of the top exchanges. Coinbase, Circle, Bittrex, Kraken and Grayscale are among the founding members of this group.

In this blog post from Coinbase, they say that they also include securities law experts. Of course, not everyone will agree with their findings. As mentioned earlier, Ripple is classed as being a security. Yet, the founder of this currency has already said that isn’t a security. It seems certain that their ratings will cause some controversy.

Their numbers tie in with the existing SEC opinion, though. The SEC Chairman is Jay Claymont. He has pointed out before that coins such as Bitcoin aren’t like securities. However, he has also said that tokens bought in ICOs should be classed as securities, and that Ethereum is probably not a security.

They can change digital asset ratings over time too. Coinbase  will “accept and consider feedback from asset issuers”. The token provider can provide extra information to try and alter their coin’s score.

This move should help to reassure investors and regulatory authorities that the crypto industry is becoming more controlled. While the ratings system may not be perfect yet, it definitely looks like a step in the right direction.