IOTA a security in the US? Crypto Ratings Council issues a 2.0

  • The Crypto Ratings Council led by Coinbase issued a rating of 2.0 for the IOTA token yesterday.
  • This makes it rather unlikely that the IOTA token is classified as a security under American law.

Established in September 2019, the Crypto Ratings Council is a U.S.-based organization that aims to help market participants who trade or develop cryptocurrencies to comply with U.S. federal securities laws. Founding members include the leading U.S. crypto and blockchain companies Anchorage, Bittrex, Circle, Coinbase, DRW Cumberland, Genesis, Grayscale Investments and Kraken.

Due to the regulatory uncertainty in the United States, members have developed a common framework that provides a neutral valuation of cryptocurrencies to give market participants an indication of the probability of classification as a security.

The valuation follows the jurisprudence and guidelines of the US Securities and Exchange Commission (SEC) to determine whether a digital asset can be considered a security now or in the future. The purpose of this is to give exchanges in particular greater security when they want to list a cryptocurrency on their platforms.

Classification of IOTA as a security rather unlikely

The Crypto Ratings Council (CRC) yesterday announced the rating of three further cryptocurrencies, the IOTA token (MIOTA), the Basic Attention Token (BAT) and the USD Coin (USDC). Both IOTA and BAT received a 2.0, while the USD coin received a 1.0 out of 5.0.

Crypto currencies such as Bitcoin, Litecoin, Monero, Dash, DAI, and Horizen have received a 1.0 from the CRC. With a rating of 2.0, IOTA is in good company with Ethereum, Chainlink, Zcash and Algorand. A score of 1 means that CRC’s analysis has determined that the cryptocurrency has few or no characteristics consistent with its treatment as a security.

Meanwhile, a score of 5 means that the CRC analysis has identified that the cryptocurrency has more features that are highly compatible with being considered a security under US law. Regarding the rating of 2.0, the IOTA Foundation stated in a blog post:

The CRC has recommended a score of 2.0 for IOTA. This is a strong score for the IOTA technology, community and ecosystem, as it shows our commitment, since day one, of positioning the IOTA token as a real-world value transfer mechanism between humans and devices in the machine economy.

With our Crypto Ratings Council rating, we believe the US market and CRC’s partner organizations will feel more comfortable and confident engaging with the IOTA token and protocol. We look forward to building deeper relationships with US counterparts who rely on the Crypto Ratings Council framework.

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