Functional & Security Cryptocurrency Tokens. Whats the difference and why it matters



hey there guys you with bow and welcome to my channel cryptocurrency Australia now in this video we are going to talk about functional tokens first tokenized securities now this is quite a complex topic and it's an evolving one as well as regulators around the world are trying to define how different cryptocurrencies fit into different categories in terms of whether they are these functional tokens or whether they're classed as securities now there's many layers to this as well so we're just going to look at a couple that you should be aware of it all add value to you if you're considering investing into a particular cryptocurrency whether that be straight off an exchange or in an IC o—- because these there's some particularly important things you should be aware of that that are going to become more and more critical as time goes on so first off let's start what are functional tokens and what art organized securities now if we come over here we can see this table now all we're going to do really is we're going to look at class 1 and we're going to look at class 4 so first of all what is a functional token so a functional token or a functional cryptocurrency enables access to a platform or a service a product or a set of programmatic API services so basically the token is used in the platform ecosystem now we're going to go into why this is really important from an investment perspective in just a little bit so the second definition we want to look at is tokenized security now a tokenized security promises or implies ownership or dividend rights including rights to vote influence and a company's direction or payments and has been registered with regulatory bodies now there's also the unverified tokenized security so tokenize security that appear to not have been cleared through a regulatory bodies now that's a really important one okay so we have a tokenized a functional token and we have a tokenized security these two main categories at the moment that are not always clear with the flood of I SEOs and the hundreds of new crypto currencies coming onto the market every day so we're going to go into why these are really important in just a bit but let's just try and break down the functional token a little bit more before we get into that so over here on block geeks is a fantastic article here this graph from William mu gr on the different aspects to a functional token that is used within a platform itself so here we have this triangle now we have a token has a role has a purpose and has a feature now a token may fit into each one of these or might have two of these aspects or it might have all three of these aspects the more utility a token has the more inherent value it should have as the platform grows over time so this is a good way at a higher level to look at some of the features different tokens or crypto currencies can actually have now these can be hard to disseminate sometimes because a lot of icy owes quite frankly aren't clear about what function their token actually serves so when you read through the white papers of many ah SEOs it's quite clear many of them appear to be just a tokenized security or just a token that has no real function within the platform itself so why is that important from an investment perspective well it's coming over here looking at coin market cap which is absolutely bleeding at the moment as you can see if all these different cryptocurrencies now there's a high probability a lot of you own one or some of these different tokens just ask yourself what value does that actually does that token have within its own system within its own business model what's actually driving up the value of that token other than pure market speculation speculation being literally what the market is willing to value it out what you're willing to buy a certain token er do you know what value your token has do you know if it's a functional token is it a took token used in an ecosystem see the important thing about this years is because there's so many icos flooding the market at the moment over time I believe the markets gonna start to mature ah and regulations are going to start to crackdown but as an investor if we just look at it from an investment perspective you want to be looking at tokens that have value proposition that have a functional token that over time that token should if the startup company is successful and companies start using their platforms and then use that token to access certain services that should organically drive up demand for that particular cryptocurrency so that's driving up the value outside of pure market speculation now you'll find a lot of the tokens I've talked about before and have said that that are my personal favorites are tokens that are functional tokens that I've taken the risk to purchase that's certain token or to invest in that serving token certain token because over time as the platform grows as the ecosystem grows there should be organic demand for that token because it's used within that platform itself tokens are purely speculative in nature and are just being driven up by what the market is willing to value it up in my opinion are the more risky tokens to look at now again as I spoke about this sometimes can be hard to to disseminate out of just the white papers themselves are sometimes not always clear so we've kind of defined how a functional token and how a tokenized security can be seen from an investment perspective but what about a legal perspective how is that how is that kind of broken down well the SEC which is the Securities and Exchange Commission in the United States is over time continually looking into where the tokens are securities or not they're looking into it more and more and they're starting to publish quite a few articles and bulletins about this because without going to a lot of detail when a token is classed as a security it has to fall under certain regulatory approvals and governance processes and there's a huge process a platform has to take if their token is classified as a security now what you'll find is all I cos will exclude the United States and Singapore that's because they haven't defined those platforms have not defined whether they're tokens are a security or not and therefore haven't gone through the registration process with the SEC or with the equivalent body in Singapore and there instead of risking it and advertising the United States and then the SEC so I'm classifying that token as a security they just exclude those countries and that's why they do that now if we look at this article here this article is just another one of these bulletins that keeps coming out from the SEC about I SEOs and now the SEC starting to look at I SEOs with a finer and finer detail and they're actually starting to take action let's have a look at an example of that so talking before about tokenized securities and whether something is a token on security or not how it's not very clear but how these companies either need to identify whether it's security or not or exclude the United States and Singapore when they're offering their IC o—- now some key points to consider when to when determining whether to participate in an IC o—- some really good points here so it says here that depending on the facts and circumstances the offering may involve the offering sale of securities if that is the case the offer and sale of virtual coins or tokens must itself be registered with the SEC or be performing pursuant to an exemption from registration before investing in an IC o—- ask whether the virtual tokens or coins or securities and whether the person selling them are registered with the SEC a few things to keep in mind about registration if an offering is registered you can find information such as a registration statement or s-1 form if a promoter states that an offering is exempt from registration and you are not an accredited investor you should be very careful most exemptions have net worth or income requirements although icos are sometimes described as crowdfunding contracts it is possible that they are not being offered and sold in compliance with the requirements of regulation crowdfunding or with the federal securities laws generally so interesting stuff let's have another look let's have a look at having an example of the SEC coming down on a recent ICO here's one called Munchie now I don't want to call out Munchie based on this I just want to use this as an example now here it says that Munchie Incorporated has elected to close its current offering to ensure it is in compliance with applicable regulations Muncie will be refunding sale participants Munchie appreciates the support is received from the community and will be announcing your offering in the near future so if we come back over here to the SEC we can see here this press release company Holtz ICO after SEC raises registration concerns so basically the sec looked into Munchie during its ico and identified that the tokens it was listing or that it was giving out in exchange for our theory and bitcoin during that IC o—- sale were actually classed as a security because they hadn't registered with the SEC and gone through those governance procedures that companies need to if they're tokens are securities they had to shut down they had to close the ICO and refund participants so this is becoming more and more prevalent and the SEC and other government bodies around the world will start to be looking into these more and more and more so it's really interesting and it's also important to consider this not only for paisios but for existing companies as well because existing companies could still be looked into based on this so here's a good article on something called the Howey test passing the Howey test how to regulate blockchain tokens now this goes into applying something called the Howey test which was basically back in 1946 the result of court case they developed a single Howey test to determine whether certain shares were classed as securities or not now people are trying to use that same test and apply that to crypto currencies and tokens it's not always clear it's not always perfect because tokens are and the applicability of tokens is evolving over time because the market is so new but we're starting to see more and more guidelines and more and more sort of more information to help different SEO companies and investors basically define whether these tokens are securities or not and here's one so introducing the blockchain token securities law framework by Rubin Ramanathan blockchain lawyer so this is really good I won't go into it in detail because it does get there's a lot of legalese and it does get quite complicated but there's also a free spreadsheet that you can access via this link where different audio companies can go through this checklist and at the end basically calculates whether or not their token may be classed as a security or not and if it is classed as a security as we discussed earlier it would have to go down that path of it of becoming registered especially if they intend on advertising in the United States so that's pretty much it guys that was just a high-level overview of functional tokens and tokenized securities and what it's really important to gain a further understanding of these if you're considering investing into not only I SEOs but existing crypto currencies as well and again always try and look for those tokens that are functional tokens that are used within the platform and if that platform becomes successful and also remembering that 95 if not higher percent of the cryptocurrencies out there have startup companies behind them there is lots of risk investing in the cryptocurrencies a moment because their startup companies they're not Microsoft's they're not Google they're startup companies so they're trying hard to disrupt existing industries with this new amazing technology that's what creates isn't the really good opportunities for investors at the moment but also comes with a lot of inherent risks due to the fact that there are so many startup companies so I hope this video taught you something I certainly gained knowledge myself looking into it as always there'll be links down to all these articles down in the description below if you want to learn more about cryptocurrencies or you're new to cryptocurrencies and you want to understand some of the fundamentals including the risks involved some of the ways to go about buying selling and storing cryptocurrencies and want to get a good understanding on how cryptocurrencies work my course is currently $29 there's $15 for the last sort of five weeks I think it's down that up to $29 it's still 81 percent off the original price you need to make sure you go through the link below W a coupon code it is a great course currently 4.7 out of five ratings which is just phenomenal again if you if you're new to cryptocurrencies this can be great to bring you up to speed on some of the fundamentals so again I hope you enjoyed the video guys thanks for watching I'm Bo and I'll see in the next one Cheers

24 thoughts on “Functional & Security Cryptocurrency Tokens. Whats the difference and why it matters”

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  2. Greate video! Security Tokens make sense in USA because of regulations. We are still living in capitalism world and first, we need to play by their rules in order to disrupt it 😀

    If you are interested in projects who are using security token approach, check out Monetizr io , they are in gaming space with strong advisory and teams.Tecshtars incubator experience combined with connections will make it a solid project

  3. you think there going through all these regulations because they’re starting to see the value of crypto assets and don’t want another bitconect? i want some opinions !

  4. Very good info. Thanks so much. It's funny, though, how many of the governments of the so-called 'developed' nations continue to insist on more and more regulation and pretend like they're trying to protect people, when in reality that protection is just a by-product of their real motives. Bunch of luciferian central bank slaves, if you ask me (for the most part anyway).

  5. This is such a good video to watch for everyone in the crypto game. Right now, its becoming very confusing between the two but everyone thinks every "coin" is a token.

  6. Excellent video! I feel like law and compliance are super important but hardly ever talked about. Good work :>)

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