Do you know what are the differences between coin tokens, utility tokens and security tokens? Although the terms are very similar, there are significant differences among them.
Coin tokens are used as if they were money
Let’s start with the easiest. Coin tokens or digital currencies are usually used in the same way as a real-life currency – like money. You can consider the coin tokens such as the bitcoin, litecoin and monero as the coins in your wallet or piggy bank. In most cases, they do not serve any other purpose – unlike the utility tokens – besides being used as money.
For example, the coin tokens can be used to:
- To transfer money
- As a store of value
- As unit of account (you can, for example, price products in bitcoins)
Utility tokens have… an utility
Utility tokens are simply currencies with specific applications. They give future access to products or services offered by a particular company. Therefore, utility tokens are not assets of speculation.
An example of an utility token is the BRZ, the first stablecoin pegged to the Brazilian Real and that will allow Brazilians to access international exchanges without being exposed to the bitcoin. But there are many others, such as ether, neo and dash. The ether allows you to make transactions with smart contracts on the blockchain of the Ethereum.
+ Read also: 6 stablecoins projects recently released worldwide
Utility tokens are not a security or a financial asset. Therefore, they do not suffer interference in the issuance or in its operation from the Securities and Exchange Commission (CVM) or any other equivalent entity in the world.
This type of token can be issued for example, by a company that will launch a video game months after and accept these tokens as means of payment for services or products that it develops.
Security tokens are subject to federal laws
Security tokens are digital assets whose value comes from an outsourced asset that can be negotiated. Therefore, these tokens are subject to federal laws governing securities. The failure in complying with these regulations can result in serious consequences, including penalties and deterrent potential to have a project under development.
On the other hand, security tokens can offer a wide variety of applications, if the issuer complies with the regulations requirements. The most promising feature is the ability to offer tokens representing a company’s stocks digitally.
In summary, security tokens are investment or speculation assets. Consequently, they are intended for investors who expect to obtain a valuation of these assets. The holders receive, for example, dividends from their investments as additional tokens.
Did you get the differences between coin tokens, utility tokens and security tokens?
Transfero Swiss is a company focused on the administration and management of investment in digital assets – considered the newest class for asset diversification. Today we have three main strategies that vary the approach and the risk profile of the portfolio. Our consultants can help you in allocating the option that best fits your style. Schedule a meeting.