Bitcoin Forum

Why many ICO desperately trying to avoid their token being classified as Security ?
Are Utility token general had more acceptance then security token despite their return in having an actually product and services ?

The other day i saw many exchange and listing site trying to avoid security token. whats the deal ?

IMHO, they are avoiding the regulations that they should pass and subject with.

Yes, from the word itself 'utility' it has use but this really wasn't met by most of the tokens that are generated through ICOs. Some appears out of nowhere and tells that they have a working product and services.

But in reality, they really don't have.

Honestly speaking, for now even with whitelist and KYC. we can't fully what those ico are up to, i have seen many ICO's concept and idea that are too ambitious, not saying that is a bad thing but the idea itself sounds like a sci-fi movie. afew example like reinvent aviation, genetic experiment and such. Each ICO are getting stranger then the other.

nowadays ICO market are so saturated, investor are getting more and more confuse on the newer ICO business model. Because ICO is so accessible to anyone (given that they have the capital to do so), any person can come out with a crazy idea then sell those token for short term profile.

Its getting out of control.

When it comes to original ideas, the point is that the creators think that extremely strange ideas will attract investors with an extremely large wallet.
Through the bear market and a huge number of scammers, a lot of money has disappeared from the ICO market.
Now the ICO must have a really good idea, a very strong dev team and the best if they have working product.

Security token is a confrontational type investment to existing security asset that was established or held through series of due diligence,  regulations and back and approved by the regulators and government  ! Utility token on the  other hand does not require so much investment and capital to start and it doesn't operate like money!

I remember george hotz created a bitcoin cash wallet just in a few minutes. basically how good the product will depend on your knowledge about that, if you are a pro in the development you should not need a huge money to create a useful one.

Utility tokens are sold generally with purpose of usage giving access to use the projects products such as their platform or dapps and not as investment. While security tokens are form of investment which provides equity in the company, profit sharing and voting rights. Security Token are governed by the security laws which are very strict to follow that is why many ICOs try to sell their tokens as utility tokens avoiding the security laws. Most of the ICOs restricts buyers from USA to get rid of SEC hammer. Security tokens are governed by security laws and it's a new kind of cryptographic token which will be thoroughly regulated. Therefore the exchange also needs to follow the laws and regulations and comply them properly if they want to list security token on their exchange. Check this article it will give you ideas about top security token exchanges...
https://coinsutra.com/top-security-token-exchanges/

Security tokens require a KYC procedure which puts off many investors and bounty hunters. If it is classed as a utility token then they have more freedom on how to promote and sell the tokens.

That is because security tokens needs to be licensed, registered and compliant with government institutions and agencies otherwise they are considered as illegal while utility tokens are waived of strict regulations for now so maybe we can say security tokens do have some regulatory issues but i also think that coming years will be dominated by securities and tokenized stocks, shares and real estate.

You have to deal and get used to it. Many of them are proposing their projects that way and in the end, how many from let's say 100 projects proposed very well became successful? not even 10 I guess.

The fact that ICOs are being abused for those business driven people that comes out with an 'idea' to sell their tokens in return of supporting the project they creating. The reality is their project is just the decoy and their real product is their tokens.

Going  by US SEC criterion, most tokens probably fall into security token category. That's why most tokens are not for sale to US citizens.

Security tokens are securities that are tokenised and utility tokens are tokens that is native to the platform  that people use to pay for using the platform. To be sincere most of these so called utilty tokens are security tokens but because most of these developers want to eat their cake and have it, they keep decieving themselves on this issue

In that case, that basically Security token are "Technically" operate like an IPO. but in a different fashion. or perhaps better serve to the regulations ?

Bitfence HNY token were considered to be a Security token, Not really sure what they mean by it but right now they re listed on SEC registration of US but didn't require KYC, they'd also distributed their tokens. I didn't see any thing that forces the holders to submit documents.

Utility tokens do free token sales promotions. and in any way, but if the security tokens are very different than that they are more stringent.

A lot of it is just legal wrangling and hair-splitting over definitions, and it doesn't have any real bearing on the underlying strength or otherwise of the token.
I'd say just go with what you decide are the good projects.