Coinbase-Led Crypto Ratings Council Draws Skepticism From Legal Experts

An initiative led by crypto exchanges to categorize digital assets has drawn mixed reactions from leading legal experts and industry players.

Coinbase, Kraken, Bittrex and a number of other exchanges announced Monday that they were forming the Crypto Rating Council to clarify whether cryptocurrencies are securities.

Coinbase chief legal officer Brian Brooks said on Twitter that the members are not providing legal advice.

Jobanputra said getting past the current legal uncertainty around digital assets was key to moving the industry forward.

Yankun Guo, a partner at Yankun Guo Law, cautioned that, while the CRC might seem like a genuine attempt at self-regulation, the industry "Should not rely on these ratings alone."

The CRC's website notes that the ratings should be construed as advisory rather than definitive.

"The CRC has not released specific weights and calculations that have led to the ratings they have released on their website so far. That leaves behind a question on how much subjectivity is in the ratings," she told CoinDesk via email.

It is also unclear how precisely these ratings will be used by the consortium's member exchanges as they deliberate whether to list an asset, or whether non-consortium members will be able to use the ratings in any way, Goldsholle noted.

"I would eventually like to see more transparency into the analysis that led to the ratings," Goldsholle said, "Because I think that could be helpful for token issuers to understand how they can design their token or network to avoid being classified as a security."

More seriously, Palley said the ratings could lead to the CRC and its members being named in lawsuits.