Digital assets and the token economy

Abstract

This chapter examines the different types of ‘tokens’ DLT projects can create, including security tokens, exchange tokens and utility tokens. It reviews the current state of regulatory thinking about what has been called ‘the token economy’ - the digitisation of interests located in both the physical world and the metaphysical world of the distributed ledger. Many new investment offerings begin life through an ‘Initial Coin Offering’ (ICO), a form of public offering of digital tokens designed to raise capital funding for the investment or project in question. The chapter reviews when ICOs constitute securities and when they might fall outside the scope of financial services regulation.