Finding and buying into a token ICO has never been easier. Token ICO participants should know what kind of token they’re buying so they know what to expect of it. Please go to the SEC website (SEC.Gov) to read up on their valuable guidance for investors (accredited and non-accredited alike). (Check out our offer, by the way.)
Coins function like money and are essentially limited to those functions. Tokens may function like money but also have database-like functionality (ie. executing smart contracts in addition to having coin-like behaviour.
Usually, when people start talking about tokens they are leaving the world of Bitcoin and entering the world of so-called altcoins – which basically means any blockchain cryptocurrency that is not Bitcoin.
Here are several types of token ICO you may encounter.
Equity Token
Tokens that give equity in a company are not exactly the same as equity shares. Don’t automatically assume its the same as stock purchases you may have made in the past, or somehow a blockchain equity is inherently better than any other stock issue. Investors should read any official offering documents and always consult with a professional where possible about such issues. You may get some shareholder rights with certain cryptocurrency tokens.
Security Token
The word Security here doesn’t refer to the safety of the token (that is, however, indicated by the crypto part of cryptocurrency which refers to the cryptographic security involved in tokens and a token ICO.) If you’re in the United States, no matter what kind of token you own, the IRS and the SEC considers it to be a security and taxable.
Utility Token
“I believe every ICO I’ve seen is a security,” says Securities and Exchange Commission chairman Jay Clayton. While you may want the certain functionality of tokens, beware: a token ICO may claim their token has no value beyond the smart-contract functionality.When you take into account the SECs view, though, you may well be holding a security even though the offeror may be claiming that they have sold you a Utility Token.
Beware especially offerors in foreign countries (where you have no rights) who claim their utility token has no value or issue tokens in thinly-veiled constructs as a whitewash to otherwise-security token functionality (that is a token that passes the Howe Test).
The SEC and other regulatory bodies worldwide have been evaluating token ICOs and are taking down many. Know where your token is being offered from, and whether you have rights to go after irresponsible offerers.
Sun Fund is proudly a US-based small business, company and we have been profitably operating a renewable energy company since 2014. We aim to tokenize the small to medium-sized renewable energy project sector.