Holding tokens, as well as a cryptocurrency, is a quite stressful venture. High volatility, rapid changes on the market, fraudulent projects – there are a lot of things to worry about. And one more was added – some tokens are considered as securities and became subject to federal regulations. In July 2017, SEC published a report, where the main statement was that during investigation DAO Tokens were recognized as securities, and, according to which, some other tokens also can be classified as securities and become a subject to regulation.
Regulation is one of the most pressing questions regarding crypto-related projects at all and tokens in particular. Tokens may fulfill functions of currency, asset, company share, the method of payment and many others, so they are quite difficult to define. Ideally, tokens must have separate specific regulations, as they are a new class of asset.
Startup fundraising, in the traditional venture capital methodology, was flipped on its head in 2017 when a boom in ICO creation saw hundreds of companies forming on the blockchain with its attached digital currency being born in the form of an investable token.
However, this crowdfunding platform which exploded at a rapid rate has been hauled in by regulators and authorities who have noticed a few worrying trends. Entities as the SEC have had a closer look at the tokens coming out of ICOs in most cases declared them securities. While there are more than just two types of tokens, including equity, work, share-alike and asset-backed, it is important to note there are two types of tokens that can be used to define a new token coming through ICO – the utility and security token.
It was never intended for ICO tokens to be securities, but SEC chairman Jay Clayton noted that every ICO token the SEC has seen so far is considered a security. The most common tokens seen coming out of the majority of ICOs fall in the category of security tokens. On the other side, there is another style of token that can serve a role in many cases where security tokens are being sought at the peril of the company insighting the ire of securities regulators. A utility token can be defined to represent future access to a company´s product or service.
The defining characteristic of utility tokens is that they are not designed as investments; if properly structured, this feature exempts utility tokens them from federal laws governing securities. Utility tokens can be further explained as coupons for the company and the service it is developing. It sounds as choosing utility token over a security token is a way to avoid SEC, but some companies rely on the securities nature of their token, however, there are a lot of companies that will not.
Examples of utility tokens: Binance coin, Huobi token, Civic, FileCoin, Kucoin shares etc...By the way, I own some of them. It makes sense. When coins have utility and real use they will have higher value overtime then ordinary shitty coins. Invest wisely, not like a fool.
source: https://www.ccn.com/crypto-poker-tokens-prove-big-hit-entrepreneur/
