Coinbase-Led Group Aims to Help Crypto Firms Avoid Securities Violations

Crypto industry leaders are taking the initiative to help firms in the space avoid falling foul of securities rules.

In a company blog post, Coinbase announced it's co-founded the Crypto Rating Council, a member-only organization purposed with assisting cryptocurrency companies determine if they comply with current U.S. federal securities law.

Coinbase is joined at launch by seven other firms: Anchorage, Bittrex, Circle, DRW Cumberland, Genesis, Grayscale Investments, and Kraken.

As part of the effort, the council will issue a 1-5 rating for a given cryptocurrency or token's similarity to a security.

Under the rating system, a 1 constitutes a crypto asset with little functional similarities to a security, while a 5 would be consistent with the definition of a security.

As of now, the council has rated 20 crypto assets with the top cryptocurrency by market cap, bitcoin, rated a 1.

The Crypto Rating Council says the rating system - which it stresses is not investment advice - is based on past U.S. Securities and Exchange Commission guidance and case law, and the legal and technical experience of the firms making up the group.

The Blockchain Association's Kristin Smith told CoinDesk that Coinbase originally spearheaded the initiative.

"[Its] an effort by the industry to comply with the incredibly complex [U.S.] securities laws," Smith said.

For now, only tokens listed by exchanges participating in the council have been rated and released.