02 – Why We Started the CRC
We formed the Crypto Rating Council to create a framework to seek to consistently and objectively assess whether any given crypto asset has characteristics that make it more or less likely to be classified as a security under the U.S. federal securities laws. The Council does not address state securities laws, which are distinct and sometimes may differ materially from U.S. federal securities laws. The important question of whether any given digital asset is a security—as opposed to a commodity, a currency, or something else—informs critical licensing, registration, and operating obligations for financial services firms that support cryptocurrency. The Council does not address specific transactions, but if a particular transaction is deemed to constitute the offer and sale of a security, it also has important implications for whether that transaction must be registered or qualify for an applicable exemption, disclosure requirements, applicable regulatory oversight of the transaction and participants and the availability of legal remedies under applicable law. The SEC has issued guidance that some digital assets may be securities while others may not be, and identified a number of facts and circumstances which may be relevant to that determination. While the SEC’s guidance has been helpful in alerting the industry to complex legal issues, determining whether any particular digital asset is a security remains highly circumstantial and difficult to resolve even with the help of leading legal and technical experts. This complexity has led to expensive, redundant, and frequently inconsistent compliance analysis among financial services firms and has generally slowed the launch of new cryptocurrency assets in the U.S. We believe that our cryptocurrency framework makes it easier for members to apply the law more consistently and efficiently across digital assets.