Last year, Coinbase and several other large players in the industry came together to form a ratings council for U.S. authorities to better determine if a cryptoasset was a security or not. In the Crypto Ratings Council’s latest evaluation, IOTA was given a score of two out of five, where one means it is highly unlikely to be a security and five means it is most probably a security, April 2, 2020.
IOTA is Used for Transactions
One of the primary reasons for an asset being deemed a security per U.S. law is if the main reason the asset exists is to give investors a return. Per the ratings council, IOTA is a medium of exchange, used for transactions on its native ledger, just like BTC and ETH.
Polymath and Maker tokens scored the closest to being a full-fledged security per the ratings council. IOTA’s open-source codebase and publicly auditable functionality were cited as core reasons, along with its use as a medium of exchange. Additionally, there are cash flows backing the token, unlike many new staking-based token models. IOTA transactions do not even have a few, adding to its altruistic nature.
The Crypto Ratings Council’s framework for evaluation is unknown, so their analysis cannot be scrutinized yet. However, they are planning to announce their criteria for an evaluation in the coming days, allowing for better insight as to how they score various cryptocurrencies.
Concerns Over the Network?
IOTA has been criticized for the Foundation’s actions, most recent of which was their unilateral decision to shut off the network. Their ability to shut down the network itself is a sign of centralization. It is unknown if this is considered as a factor by the council while rating network tokens.
However, it cannot be denied that the purpose of the IOTA token is to transfer value over the IOTA network. But, it also offers voting power, like the Maker’s MKR token. Issues like probably kept the council from giving IOTA a flat score of one.
IOTA is not subject to United States regulation at the moment, as the IOTA Foundation and its members are predominantly based out of Europe.