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Cryptocurrencies and Accredited Investors

Cryptocurrencies and Accredited Investors

A central distinction in cryptocurrency is the difference between tokens and coins. All cryptocurrencies must fall into one of these two categories. Coins are different from tokens because coins include their own blockchain, unlike tokens. Let’s review some important cryptocurrency accredited investor issues.

Most of the popular cyrptocurrencies such as Ethereum, Bitcoin, and Ripple are identified as coins and utilize the blockchain technology. That means coins work within a peer-to-peer decentralized network in which a digital ledger records transactions.

Differences Between Security and Utility Tokens

It is especially important for investors and cryptocurrency companies to understand the differences between the two different types of cryptocurrency . The Security and Exchange Commission (SEC) has more stringent regulations for security tokens (which are considered digital securities) than for utility tokens.

An utility token allows you to trade or purchase on a cryptocurrency exchange without having cryptocurrency accredited investor status, whereas you aren’t allowed to do so for a security token. Generally speaking, a utility token gives investors access to a product or service.

Security tokens are similar to securities in that they represent part ownership in a real asset that is tradeable and exists outside of the blockchain. These kinds of tokens are regulated by the SEC, just like traditional securities. You must be an accredited investor to participate in security token offerings (STOs).

Why the Differences Between Cryptocurrency Types Matter

It is important for prospective cryptocurrency accredited investors to understand the value of the cryptocurrency they have under consideration, and how any applicable SEC regulations will affect that value.

Utility and security tokens represent two different possible pathways in the development of cryptocurrency. These are: cryptocurrency as a payment method and as tokenized securities. This raises a few important questions: Will the stock market and/or U.S. dollar be replaced by cryptocurrency? What other issues will affect the cryptocurrency investor along the way? Time will tell, but in the meantime cryptocurrency companies are making considerable progress and developing innovative applications using both approaches.

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