According to Coinbase’s Council, XRP has the highest rating among 28 cryptos – meaning it is the closest you can get to a security: 4 out of 5.
As it has been reported, eight major cryptocurrency firms in the US will be represented as their top executives testify before the U.S. House Financial Services Committee on December 8.
The hearing was set up as part of congressional efforts to establish a regulatory framework for digital assets as the ecosystem shows no signs of stopping its growth in size and significance.
The committee will focus on “the challenges and benefits of financial innovation” and will receive Alesia Haas, the CFO of Coinbase Global; Jeremy Allaire, the CEO of Circle; Sam Bankman-Fried, CEO of FTX Trading; Chad Cascarilla, CEO of Paxos; and Dennelle Dixon, CEO of the Stellar Development Foundation.
Their testimony will likely be critical for what lawmakers will think of digital assets, their nature, and how to properly regulate the asset class and the firms within the space without hurting innovation.
Coinbase plays a leading role. The cryptocurrency exchange has become the most relevant in the United States, it has already gone public, and has been offering guidance to market participants, blockchain companies, financial institutions, lawmakers, and government officials.
As part of its leadership play, Coinbase founded the Crypto Rating Council in 2019, which was joined by Anchorage, Bittrex, Circle, Cumberland DRW, Genesis Trading, Grayscale Investments, and Kraken. OKCoin, RADAR, and eToro USA joined later.
The goal of the Council was to create a system that rates cryptocurrencies on a scale of 1 to 5 as to whether a cryptocurrency is likely to be a security.
“A score of 5 results when an asset appears to have many characteristics that are consistent with the Howey-test factors. It is probably more likely, relative to lower-scored assets, to implicate the U.S. securities laws.”
“A score of 1 results when an asset appears to have few characteristics that are consistent with the Howey-test factors. It is probably less likely, relative to higher-scored assets, to implicate the U.S. securities laws.”
According to Coinbase, the ratings are not endorsed by any government agency or third party and don’t serve as legal advice.
So far, the CRC has rated 28 cryptocurrencies, including XRP, the digital asset fueling Ripple’s blockchain network. Of the 28 digital assets reviewed, XRP has the highest rating – meaning it is the closest to a security: 4 out of 5.
Not even EOS got such a high score. The digital asset developed by block.one was sued by the SEC for having held an unregistered securities offering and settled the case for $24 million (as well as settled a class action for $27.5 million). EOS was rated 3.75 out of 5.
According to the CRC, Ethereum is only a 2 out of 5. Ripple has been using ex-SEC Commissioner Bill Hinman’s 2018 analysis on Ether as proof of total confusion among the SEC ranks as the defendants in the SEC lawsuit look to win the case on a summary judgment over the fair notice defense.
A few months ago, attorney Jeremy Hogan offered his analysis on how much of a security each of the top cryptos are. On Ethereum, he considered the 2014 pre-sale and the centralized management structure as problematic. Even more so is the change to staking with Ethereum 2.0.
A recent report by JP Morgan pointed to Coinbase as a key player in the return of XRP to normality in the United States after and if Ripple wins the SEC lawsuit.
JP Morgan’s North America Equity Research found value in XRP for its unique value in the world of finance with a clear competitive advantage against SWIFT and complementary to stablecoins. Mainstream adoption would be at the end of the tunnel.
“If the company is able to win the SEC lawsuit and trading resumes on major cryptocurrency exchanges like Coinbase, XRP is poised for significant adoption”.