The committee described in its report that the “Use of digital tokens resolves the issue of multiple currencies, improves liquidity and capital compliance costs, allows for micro-payments and expedites the payment process, which further eliminates liquidity risks,” elaborating.
Regulation of Cryptocurrencies.
The Steering Committee report suggests that tokens can be grouped into two categories depending on the objective of their issue. The first category is utility tokens, which “entitle future access to a company’s product or service,” the report reads. This type of token includes digital coupons, such as those a hotel or other service providers would issue.
The second category is security tokens. The report notes that some token issuance has the attribute of a security, referencing the U.S. SEC vs. Howey court case which established the guidelines for determining if an offering constitutes a security. The report briefly explained how the Howey test works, stating that four criteria must be satisfied. Particularly, there must be an investment of money and an expectation of profits. The investment of money must be in a common enterprise and any profit must come from the efforts of a promoter or third party. According to the report.
The regulation of coins or tokens depends on the characteristics and the purpose for which they are being issued.