Recently, news emerged that a number of significant exchanges in the cryptocurrency space would be looking to tackle the possibility of listing coins that could be classed as securities. The likes of Coinbase, Kraken, Bittrex, and even traditional payment processor Circle have formed what is being dubbed ‘The Crypto Ratings Council’ where a system is used to determine the likelihood that a coin is a security.

The Council has already assessed some major tokens available and labeled a few prominent ones as likely securities – such as XRP, which is fighting a court battle to disprove this ascertain already. However, there has already been some backlash over this rating system.

Concerns have been aroused that the Council’s compliance guidance might be affected by the private stakes of those involved. It is these types of conflicts of interest that could unfairly derail many legitimate projects, as well as compromise the company’s noble endeavor.

These concerns were recently addressed by Brian Brooks, the chief legal counsel at Coinbase. The entire classification of the rating system is devised around a scalable, points-based rating system that draws upon yes-no questions formulated on the basis of the SEC guidance for classification.

Because of this, Brooks was quick to state that this did not represent legal advice. He said: “This is essentially an automated compliance tool, of which there are many in the financial services world. Think Hummingbird for AML compliance, or Fair Lending Wiz for fair lending compliance. No one thinks those tools represent the practice of law. And this certainly doesn’t constitute investment advice – we’re not rating the quality or value of assets, only their status as a security or not.”

Regardless, there are still concerns about a conflict of interest as those who are doing the ratings could have ulterior motives for their classification.

“A group of private companies jointly declaring how they think things that directly impact their bottom lines should be regulated isn’t likely to be all that persuasive to regulators or investors,” explained Tyler Gellasch, executive director at Healthy Markets and former counsel to SEC Commissioner Kara M. Stein.

The move to form such a council does indeed seem to have pure motives. One of the biggest concerns by regulators, especially with the creation of new tokens and cryptocurrencies, is their classification as securities. However, the interpretation of their status is still very debatable and cannot be black and white.

Thus, the application of such a system does call into question concerns about its effectiveness, and effect in general. That is why, given the Council’s status as an independent body not endorsed by the SEC, CFTC, or other agencies, Gellasch pointed to what he deems the “very limited utility” of the provision.