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The association administering the ratings includes exchange operators Coinbase, Kraken, Circle, and Bittrex - the scale will be 1 to 5, with a 1 denoting NOT a security (Bitcoin) and a 5 signifying a token is a security that unregulated crypto firms can't issue, sell, or trade. Issuers won’t have upfront input in the ratings, although they can provide information to dispute a score their token received.
“One of the biggest uncertainties around crypto and the reason why more asset managers are not comfortable with it is the uncertainty around which is a security and which is not,” said Brian Brooks, chief legal officer of Coinbase, which conceived of the ratings. The SEC’s enforcement division has sued some companies that issued crypto tokens and settled with others over claims the assets were securities that should have been registered with the SEC.
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