A rating is one tool to help investors when making investment decisions about crypto assets from an Crypto Asset. Crypto asset ratings as assigned by CAR are our forward-looking opinions about risk of investment in different crypto assets. Our ratings express our considered opinion about the ability and willingness of a crypto asset issuer or company to execute its proposed business plan successfully. Through the crypto asset ratings we try to capture the investment quality of a crypto asset, risks involved from different perspective such as legal, business, technical, financial etc. We aim to bring transparency in the crypto market through our rating framework, research and insights, supported by highly capable analysts.
CAR's assigned crypto asset ratings are not absolute measure of likelihood of success of the proposed plan for which the crypto asset is being issued. Since there are unforeseen future events and developments, the assignment of the ratings is not an exact science. These ratings should not be treated as guarantees or as exact measures of the probability of success of the business plan. Ratings are not recommendations to buy or sell or hold a particular crypto-asset or token, nor are they a guarantee that default will not occur. In addition, a rating does not comment on the suitability of an investment for a particular investor in a particular crypto-asset. A rating can be considered as a guidance before an investor conducts her own due diligence about a crypto asset.
Crypto asset ratings can play a useful role in enabling companies to raise money directly from investors by issuing crypto assets. Investors and other market participants may use the ratings as a screening vehicle to match the relative risk of an issuer or individual crypto asset issuance with their own risk tolerance in making investment and business decisions.
According to various estimates, there can be an average of 5-6 Crypto Asset issuances every day in 2018
Crypto assets are high risk propositions for investors as there are no trusted middlemen like an investment bank or VC
Due to unregulated nature of the industry fraudulent ICOs have been prevalent
Except for a whitepaper, not much information is initially disclosed about a crypto asset
Our ratings opinions are based on analysis by experienced professionals, who evaluate and interpret information received from the crypto asset issuers and other available sources to form a considered opinion. CAR’s analytical rating framework is divided into four risk categories to ensure salient qualitative and quantitative issues are considered. The scores and commentaries are provided by different group of internal and external analysts.
Junior Analysts These are analysts who are selected based on their expertise and experience of dealing with crypto-assets. For any rating project, we choose one junior analyst for each of the four risk buckets to rate a particular crypto asset i.e. a rating process is initiated by a group of four junior analysts.
Senior Analysts Similar to JA, we select one Senior Analyst (SA) from each of the four risk buckets who reviews the score and commentary given by the JAs. SAs also prepares the write-up for their respective risk categories, whcih are consolidated in the final rating report.
Lead Analyst A Lead Analyst (LA) has enough overall expertise in the crypto-asset field to oversee a rating project. For every rating project CAR assigns one LA to that project. They review output coming from the senior analysts, provide feedback to them and is responsible to prepare the consolidated rating report.
External Analysts We expose a subset of the rating parameters to the registered and approved External Analysts (EA). CAR makes effort to ensure that the relevant external analysts are selected to provide scores for rating a particular crypto asset. This is ensured by a mapping algorithm, which maps the profiles/ competencies of the external analysts with the domain of a particular crypto asset.
Review Committee A Review Committee (RC) consists of two experts who review the final rating assigned and the rating report. A rating is considered final only when it is approved by the RC.
At CAR, we are strongly committed to the highest standard and ethical practice when we assign a rating to a crypto asset. We take extreme care to ensure that that right people are assigned the right responsibilities and everybody discharges his/ her responsibility within the ethical framework as set by the company. We have implemented a layered rating governance structure and all the parameter scores are stored on blockchain for auditability.