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Coinbase, Kraken and others develop a system to rate cryptocurrencies on likelihood they are securities

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Cryptocurrency exchange operators, including Coinbase, Kraken, Circle Internet Financial and Bittrex, have developed a system to rate which cryptocurrencies are likely to be securities.

The Wall Street Journal reported the news on Monday, saying that the system will help the operators to decide which cryptocurrencies to list and not to list for trading on their exchanges.

Via the newly formed Crypto Ratings Council, the operators will publish online ratings of cryptocurrencies on a scale of 1 to 5, with the highest value signifying that a token is a security, per the report. Issuers of tokens reportedly won’t have upfront input in the ratings, although they can provide information to “dispute a score their token received.”

Bitcoin (BTC) is scored as a 1 by the Crypto Ratings Council, indicating that it has a very low likelihood of being a security. Other members of the council include trading and custody firms such as Anchor Labs, DRW Holdings' Cumberland unit, Genesis Global Trading and Grayscale Investments.

Here are the ratings of several cryptocurrencies, according to the Crypto Rating Council or CRC. Interestingly, XRP, has a score of 4:

“It’s our hope the SEC [the U.S. Securities and Exchange Commission] will view this as a positive step,” Mary Beth Buchanan, Kraken’s general counsel, was quoted as saying in the report. It “does show the SEC what each exchange is doing to come to a decision.”

The SEC has, on several occasions, charged token issuers for allegedly violating securities laws, including Kik Interactive and ICOBox. SEC Chairman Jay Clayton recently said that any selling of securities must play by SEC rules. “If you have an ICO [initial coin offering] or a stock, and you want to sell it in a private placement, follow the private placement rules. If you want to do any IPO with a token, come see us.”

UPDATE: After the publication of this story, a Paxos spokesperson told The Block that the firm is not part of the council as reported by the WSJ.