Dean
Member
Utility tokens and security tokens differ significantly in terms of regulation and functionality. Utility tokens are designed to provide users access to a specific product or service within a blockchain-based ecosystem, acting as a form of currency within that network. They are not considered investments and, therefore, are generally not subject to stringent financial regulations. Security tokens, on the other hand, represent ownership or rights to an asset, similar to traditional financial instruments like stocks or bonds. As a result, they fall under the purview of securities laws and are subject to strict regulatory scrutiny by bodies like the SEC in the United States. This classification imposes rigorous compliance requirements, including registration, disclosure, and investor protection mandates.