11 Months Ago

Is it any coincidence that almost the same day as the SEC’s press announcement about Block.one, a ‘posse’ of Crypto exchanges – Anchorage, Circle, Kraken, Bittrex, Greyscale, Genesis, DRW Cumberland and Coinbase launched an ICO rating service to help determine if an ICO is a security or not?

They have set up a Crypto Rating Council (CRC) and intend to publish ratings on ICOs on a 1 to 5 scale - 1 signifying a ‘Utility token’ has few or no characteristics consistent with a traditional regulated security i.e. Bitcoin A rating of 5, the CRC suggests that the token has many characteristics potentially of a security.

Mary Beth Buchanan, Kraken’s general counsel, was quoted in the WSJ as saying, “It does show the SEC what each exchange is doing to come to a decision.” However, the Crypto Council’s Frequently Asked Questions recent release stated, “The framework is the Council’s attempt to provide a consistent analysis which the members find useful but it is not legal advice and does not reflect the opinion of any member or outside counsel of whether any given asset is a security.”

Interestingly, the CRC has determined that XRP from Ripple (which is trying to compete with SWIFT) and which has always argued that it is a utility token, has been given a rating of 4. So, will this encourage regulators, in particular, the SEC, to look again at Ripple, on the basis that it is indeed a security token, and which potentially may have raised capital and not meet SEC regulations? After all, Ripple has been served a class action alleging that it has sold hundreds of $ millions of tokens without complying with the SEC security regulations.

At least the CRC is attempting to offer guidance and, no doubt, others will look to amend and try and improve on offering different guidance. This has to be welcomed, as opposed to ignoring this issue and waiting for the SEC to knock on their door which is the tact some organisations have currently taken.



A Year Ago

The Ethereum Blockchain, according to icowatch, has been used by over 82% of all the ICOs (5,200+) that have been launched to date. Many of the companies which have launched Initial Coin Offerings (ICOs) are still building their platforms and businesses so are not carrying out transactions on the Ethereum Blockchain.

Vitalik Buterin, the co-founder of Ethereum, spoke to the Toronto Star and made some worrying comments about fees, adoption, scalability and that he thought the Ethereum Blockchain was overloaded. If this Blockchain is at its limits, it will potentially slow the adoption by institutions of this Blockchain. However, Buterin believes that Ethereum’s challenges, particularly its capacity, can be addressed by using Proof of Stake.

The issue is, that currently, Ethereum Blockchain requires every computer/node to verify every transaction. If this can be altered so that each computer verifies, on average, a certain number of transactions (e.g. not every transaction), whilst it would make the Ethereum Blockchain less secure, but it has the potential to reduce costs by a factor of 100.

These growing pains are inevitable, and not all transactions need to happen in almost real-time. After all, most analogue paper-based processes that many businesses currently rely on can take days to be recorded and be completed.