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Coinbase, Kraken to jointly define Crypto Securities!  Coinbase, Kraken are jointly tackling on an issue that is plaguing the Crypto industry via the SEC – which cryptos are securities?

The Crypto Ratings Council, the Coinbase, Kraken joint effort, will also include Circle Internet Financial, Bittrex, Genesis Global Trading, Grayscale Investments, Anchor Labs, and DRW Holdings’ Cumberland unit.  The group is continuing to recruit participants.

The goal of this council is to provide clarity on what tokens can be traded with or without the supervision of regulators.  The Wall Street Journal first broke this story.

Security statuses will scale from 1- 5, and is set to launch today.  The Crypto Ratings Council will publish online ratings for digital assets – high value means that the token is considered a security and cannot be issued, sold, or traded by unregulated firms.

The council has designated Bitcoin as a 1 rating, as regulators have publicly stated that Bitcoin is not a security.  Brian Brooks, Chief Legal Officer of Coinbase, reportedly conceived the rating system.  Regarding the question as to whether or not a certain token is a security, he said is “one of the biggest uncertainties around crypto and the reason why more asset managers are not comfortable with it.”

Mary Beth Buchanan, Kraken’s general counsel, expressed hope that the SEC will view the initiative as a positive step – the council aims to show the SEC that exchanges are spearheading the effort to come to a decision on the matter and stay compliant.

Our own Kurt Wuckert Jr. has his own test that he likes to follow:

Kurt Wuckert Jr, our fundamental analyst has his own “Crypto Howie Test.

Kurt’s Howie Test for Crypto:

– Was there an ICO? (Basically everything on Binance) It’s a security

– Is it a utility token that doesn’t get used for that utility yet because there’s no finished product or no viable business? (Most Ethereum Assets) It’s a security

– Is the token unnecessary for the rest of the business model? (XRP, XLM) It’s a security

– Is it a decentralized cash? (BTC, BCH, BSV, LTC, XMR, Dash…) NOT a security.

– Is it a decentralized proof of work blockchain with a predicable emission schedule actually used for its stated purpose and isn’t a fundraising platform? NOT a security.

– Is the token issuer a private company? This is a red flag, and you should look at the other items of the checklist under the assumption that it’s already a security.

– Is it kind of iffy like Ethereum’s original ICO? Err on the side of caution because it’s probably a security.

What do you think?  Let us know on our Facebook page!

 

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