The Crypto Rating Council is a diverse group of leading crypto businesses committed to the responsible growth and maturation of cryptocurrency markets and related financial infrastructure and trading services. The CRC is focused on performing objective, repeatable analysis to help members assess whether a particular crypto asset is more or less likely to be classified as a security under the U.S. securities laws. In over a year since its inception, the CRC has improved and deployed its framework to assess dozens of crypto assets and we have published many of the results of our analysis as a general resource to the community.
Today the CRC is happy to announce it is making its analytical framework public. The CRC believes that entrepreneurs, businesses, and policymakers will be interested in the factors that the CRC has developed to more consistently evaluate crypto assets under the U.S. federal securities laws. As we previously announced, the CRC’s framework is based on a painstaking analysis of U.S. securities laws, the SEC’s Framework for “Investment Contract” Analysis of Digital Assets, and the evolution of crypto technology. Over the course of the past year, it has updated its framework to take into account trends in popular consensus models (e.g. proof-of-stake), stablecoins, defi, and recent court rulings. The CRC has also adjusted the weightings of many of its factors to take into account those facts which, in its view, seem to be most relevant in concluding whether an asset is likely to be viewed as a security in a court of law.
The CRC’s framework produces a point-based outcome for each of of the four prongs of the relevant U.S. law analysis — the Howey Test — which then scale into an overall score between 1 and 5, with 1 signifying a lower risk that the asset would be deemed a security, and 5 signifying a higher risk that the asset would be deemed a security. This scaled score allows members to swiftly differentiate tokens which may more easily, in the CRC’s view, qualify as non-security cryptocurrencies from those tokens which may be associated with higher risk factors under the U.S. securities laws and may merit additional analysis at the separate discretion of each member. Even higher risk assets, such as those rated 4 or higher, may not be securities, and the CRC’s analytical framework helps members home in on those facts which discernibly move the needle in one direction or another.
Over time, our framework will continue to evolve as law and technology changes. We invite comment from members of the community and policymakers as we continue to support efforts to establish more bright-line rules and law that make it easier to launch cryptocurrency products in the U.S.
Disclaimer: The analysis concerning whether a digital asset is a security may evolve over time, as the nature of digital assets, applicable precedent, and SEC statements and interpretations change and evolve. Each member of the community is encouraged to seek legal advice from its own attorneys to obtain legal guidance on these subjects. Neither the Council nor their respective affiliates, directors, officers, employees, security holders, agents and attorneys, are acting in the capacity of attorneys.