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Security vs. Utility Tokens


Sophia Gavrila:

What we' re witnessing with crypto is for the first time we have a sovereign ... We have money as a sovereign property of the individual. Meaning that, crypto represents a financial ecosystem that is completely separate from nation state powers. We not have the ability to grant individuals, to grant people who are passionate about learning more. Say if you come from the film world or from the literature world. From journalism. Or say you're into software, you know. I think that cryptocurrency you can tokenize so many different types of goods and services and it's an inclusive environment.

John Todaro:

I think there's definitely a line between utility tokens and security tokens. From my understanding about security tokens would have some sort of stream of cash flows that could be related to a security. So, any dividend type of payment might be considered a security token. But, I think a lot of the space where people are trying to secure a security token really

A lot of the utility tokens don't have a dividend type of payment or a stream of cash flow, so it's much harder to make the case that those are security tokens. The tokens that are being bought with utility tokens are really being used on the platform. There's a lot of different products out there where in order to access them and access the platform and use it you would need these utility tokens. So, it's not really fair to call them security as an investment, really. In a lot of ways it's really almost the gas that's powering a certain platform. It's an important distinction and I think that's primarily the main one.

Edwin Llrey:

Courts have held that cryptocurrency are generally commodities. But the SCC hasn't clarified on that and actually, recently, SCC is going to come out and make a statement about whether Ethereum is a cryptocurrency or whether it's a token or whether it's a commodity. I think security tokens, hypothetically, should represent a security that isn't necessarily integral to the functioning of the platform. But there are still things to be clarified from a legal perspective how that's going to function.

Simons Chase:

The US regulators seem to have a positive bend on the way they want to go. Obviously, we want to eliminate all the hashtag lambo instances and focus on real value creation. So, we're in this gray area and this transition stage and it's perfect time for people who missed last year to start learning about the new standards, the new protocols, the new platforms that are going to lead the way on the next big boom, which is going to be much bigger.

John Todaro:

I think there probably will be more and more security tokens as the regulation kind of clamps down on that. I think a lot of people are looking to do ICOs will probably move into that avenue where at that point call their stuff security tokens versus utility tokens.

But I think that can even morph. So, what may start out as a security token can really transition to more of a utility token. That'd be viewed less as an investment. And that what the SCC Jay Clayton has said before that things can maybe start out as more like an investment of security. But then more of into a utility token. But I think we will see more and more kind of push the envelope. Especially, from the law perspective, too. More lawyers will probably push folks who are doing ICOs into security tokens and away from calling something utility tokens, but I think we still need a lot more regulatory clarity to see what would really be considered a security token versus a utility token before we see much uptick in that. And also, what are the costs associated with that and the differences.

Sophia Gavrila:

I think that the 2017 rise of ICOs was full of a lot of great products, but as most people probably know it was full of a lot of bad ones, too. We witnessed the great I-scammos, you know? A lot of people who enter into blockchain technology or who have a business with the word blockchain on it, but they don't truly embody the values that this technology represents. They don't truly embody the fact that this technology is going to be able to provide liquidity and financial resources to people on a global scale.

Simons Chase:

Liquidity is just where there are a large number of buyers and sellers and typically, that means that you could trade to some significant value without deteriorating the price or making the price of a security go up dramatically.

Ingamar Ramirez: There hasn't been that killer app yet of utility that is so useful that I don't even need to know how it works in order to use it. No one's cracked it yet. One would think that in a few years somebody would think of something, but until then were just making a lot of promises that something great will happen.