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Author: Admin | 2025-04-27
What are the token classifications?Tokens are usually categorized as either utility or security. Tokens are utilities because they have a function within their Blockchains ecosystem (like Filecoin and Civic). A Security token is essentially an investment contract that represents legal ownership (as recognized by the SEC) of a physical or digital asset (like real estate, artwork or ETFs) that has been verified on the blockchain.Rayan Goutay, a General Counsel at Gatex – the upcoming hybrid FINMA-regulated crypto exchange based in Switzerland, comments: “There is an overlap between the two types of tokens: just like fiat currencies can be bought for the purpose of speculation and investment, people can buy utility tokens for the purpose of investment rather than for participating in the network. Whether or not a utility token is also a security token is ultimately a question that will be decided by the governments, courts, and regulators of the jurisdiction where the token has been issued and/or where the investor holding the token resides. It is an important question as there are many implications that follow from this classification, for example, how and to whom that token can be sold, and what are the tax implications of buying, selling, and holding the token”Investors can exchange fiat money or cryptocurrencies for security tokens via a smart contract. With this verifiable and legal ownership, security token holders can easily trade their tokens for other assets, use them as collateral for a loan or even fractionalize them to store in different digital wallets. The true value of security tokens is their ability to completely change how we define asset ownership, making assets that have traditionally only been available to wealthy people in developed nations more accessible to regular people all over the world to own (even if only in portions) and collect
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