On a Scale from One to Five Measuring Security Qualities, the Crypto Rating Council Rates XRP a Four

The Crypto Rating Council, launched in 2019 by a handful of high profile blockchain-based firms, rates Ripple’s native crypto XRP a 4 out of a scale from 1 to 5 in assessing whether the digital asset is a security under the CRC Securities Framework Asset Ratings.  If a crypto is a 1, it is probably not a security. For example, Bitcoin is a 1, as is USD Coin (a stablecoin based on the dollar). A five means the digital asset is pretty much a security.

The CRC was ostensibly launched to better define the emerging landscape of digital assets in a world where bright-line rules provided by regulators fell short.

At the time of its launch, a CRC representative stated:

“In order for the crypto industry to thrive in the US we need a clear regulatory environment. Until that time, we’re pleased that [the] industry is collaborating closely on the Crypto Ratings Council, giving entrepreneurs and investors the tools to understand the appropriate, current regulatory regime.”

Of course, Ripple has just been charged by the Securities and Exchange Commission (SEC) for the sale of unregistered securities in the distribution of XRP. Ripple has publicly stated it intends to fight the charges as the “SEC’s theory, that XRP is an investment contract, is wrong on the facts, the law and the equities.” Ripple claims that XRP is a digital currency, similar to Bitcoin and Ether.

While Ripple may argue this point, it appears that its peers on the CRC may differ slightly. As of today, XRP is the one crypto rated as 4 with no others topping that number. Not even Tezos.

The CRC defines its ratings as follows:

1. A score of 1 means the Council’s analysis found that an asset has few or no characteristics consistent with treatment as a security.

2. A score of 5 means the Council’s analysis found that an asset has many characteristics strongly consistent with treatment as a security.

3. Scores in between reflect the relative strength and presence of characteristics relevant to the Council’s framework. Because the Howey test requires all 4 prongs to be met, any non-5 score may have a material basis to not be deemed a security.

The CRC notes that scores are subject to change at any time without notice.



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