Payment Tokens (FINMA) / Cryptocurrencies (SEC)

Payment tokens or “transactional tokens” are simply a type of digital currency. Much like with fiat currencies such as US dollars or the Euro, this type of token is explicitly used to purchase goods or services. However, unlike fiat currencies, no governments are tied to the creation of these tokens.

FINMA defines these tokens as :

“synonymous with cryptocurrencies and have no further functions or links to other development projects. Tokens may in some cases only develop the necessary functionality and become accepted as a means of payment over a period of time.”

The most popular payment tokens on the market now are Bitcoin (BTC), Litecoin (LTC), and Monero (XMR), just to name a few.

Utility Tokens

The creation of Ethereum and smart contracts led to the birth of utility tokens. Utility tokens are tied to a particular platform and enables users to purchase goods or services from that specific network.

FINMA’s take on utility tokens is as follows:

“tokens which are intended to provide digital access to an application or service.”

One of the most famous utility tokens today is Filecoin (FIL). Last year, their ICO broke the record for the biggest token sale ever, raising more than $250 million USD. To use Filecoin’s decentralized storage solution, a user must first pay a small sum of FIL tokens.

Bincentive’s token (BCNT) is also a utility token

and like Filecoin, is how the processing of our service begins. BCNT is required to initiate smart contracts with investment advisors and thus allows users to participate in the following of their expert trades.

Asset Tokens (FINMA) / Security Tokens (SEC)

In short, asset tokens or security tokens, are basically a digital representation of a physical asset. For example, an asset token could be tied to real estate or to precious metals such as gold and silver. It could also represent something like stocks or even intellectual property.

FINMA explains asset tokens as:

“assets such as participations in real physical underlyings, companies, or earnings streams, or an entitlement to dividends or interest payments. In terms of their economic function, the tokens are analogous to equities, bonds or derivatives.”

Compared with payment and utility tokens, there are significantly less successful ICOs having security tokens. Blockchain Capital (Bcap), founded by Brock Pierce, Bart Stephens, and Bradford Stephens, is believed to be the very first company to provide a public offering for a security token. As such, it is among the more popular security tokens to pay attention to this year.