The Financial Conduct Authority (FCA) defines “utility tokens” as tokens which:

“grant holders access to a current or prospective product or service but do not grant holders rights that are the same as those granted by specified investments. Although utility tokens are not specified investments, they might meet the definition of e-money in some circumstances (as could other tokens)”.

The EU Commission defines “utility tokens” as:

“a type of crypto-assets which are intended to provide access digitally to an application, services or resources available on a distributed ledger and that are accepted only by the issuer of that token to grant access to such application, services or resources available”.

In Switzerland, FINMA’s guidance defines “utility tokens” as:

“tokens which are intended to provide access digitally to an application or service by means of a blockchain-based infrastructure”.

In France, the Loi PACTE (published in May 2019) defines utility tokens as any intangible asset representing, in digital form, one or more rights that may be issued, registered, retained or transferred through a distributed ledger technology that makes it possible to identify, directly or indirectly, the owner of such an asset.

In Germany, the Federal Financial Supervisory Authority (BaFIN) recognises “utility tokens” (also known as app tokens) as:

“crypto tokens that give access to certain services or products, similar to an admission ticket or a voucher…As a general principle, utility tokens do not constitute securities within the meaning of the WpPG or capital investment within the meaning of the VermAnlG. In many cases, tokens like this are also not financial instruments under the KWG”.

In Malta, under the Virtual Financial Assets Act 2018, a “virtual token” is defined as:

“a form of digital medium recordation whose utility, value or application is restricted solely to the acquisition of goods or services, either solely within the DLT platform on or in relation to which it was issued or within a limited network of DLT platforms:

Provided that the term ''''DLT platform'''' referred to in this definition shall exclude DLT exchanges;

Provided further that a virtual token which is or may be converted into another DLT asset type shall be treated as the DLT asset type into which it is or may be converted”.

These examples demonstrate that definitions of consumer tokens tend to explicitly distinguish these from securities or other financial instruments, and refer to such tokens as a means to access some form of product or service based on distributed ledged technology.

The Financial Conduct Authority (FCA) uses the term “security token” and defines this as:

“tokens with specific characteristics that mean they provide rights and obligations akin to specified investments, like a share or a debt instrument…as set out in the Regulated Activities Order”.

In Switzerland, FINMA’s guidance defines “asset tokens” as tokens which:

“represent assets such as a debt or equity claim on the issuer. Asset tokens promise, for example, a share in future company earnings or future capital flows. In terms of their economic function, therefore, these tokens are analogous to equities, bonds or derivatives. Tokens which enable physical assets to be traded on the blockchain also fall into this category”.

In Germany, the Federal Financial Supervisory Authority (BaFIN) recognises “security tokens” also as “equity tokens, investment tokens or asset tokens”. Such tokens give holders:

“membership rights or contractual claims on assets that are comparable with those of a shareholder or bondholder (e.g. claims to dividend-style payments, voting rights, repayment claims, interest payments). Security tokens generally constitute securities within the meaning of the Prospectus Regulation, the WpPG and the Securities Trading Act (Wertpapierhandelsgesetz – WpHG), and are also financial instruments under the KWG”.

In France, there is no specific definition of financial asset token or security tokens—however any tokens that qualify as financial instruments under MiFID II are distinguished by way of exclusion from the definition of utility tokens under the Loi PACTE (published on May 2019).

Similarly, in Gibraltar, while there is no formal definition for financial asset tokens, the Gibraltar Financial Services Commission (GFSC) recognises that “in some cases, tokens represent securities, such as shares in a company, and their promotion and sale are regulated as such”.

As seen from the above examples, there is no unifying understanding of financial asset tokens across jurisdictions, and in some cases these are defined by reference to their capacity to qualify as a financial instrument under existing financial services legislation.

The Financial Conduct Authority (FCA) uses the term “exchange tokens”, noting that “these tokens are sometimes known as ‘cryptocurrencies’, ‘crypto-coins’ or ‘payment tokens’”, and defines this as tokens that are:

“not issued or backed by any central authority and are intended and designed to be used as a means of exchange. They tend to be a decentralised tool for buying and selling goods and services without traditional intermediaries.”

The Financial Action Task Force (FATF) defines “virtual currencies” (as distinct from fiat currency, e-money, and digital currencies which can cover digital representations of either virtual currency (non-fiat) or e-money (fiat)) as:

“a digital representation of value that can be digitally traded and functions as (1) a medium of exchange; and/or (2) a unit of account; and/or (3) a store of value, but does not have legal tender status (i.e., when tendered to a creditor, is a valid and legal offer of payment) in any jurisdiction.”

In the EU Fifth Anti-Money Laundering Directive (5AMLD), “virtual currencies” is defined as:

“a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically.”

In Switzerland, FINMA considers “payment tokens” as being synonymous with cryptocurrencies, and defines these as:

“tokens which are intended to be used, now or in the future, as a means of payment for acquiring goods or services or as a means of money or value transfer. Cryptocurrencies give rise to no claims on their issuer.”

Singapore’s Payment Services Act 2019 defines “digital payment token” as:

“any digital representation of value…that —

1. is expressed as a unit;
2. is not denominated in any currency, and is not pegged by its issuer to any currency;
3. is, or is intended to be, a medium of exchange accepted by the public, or a section of the public, as payment for goods or services or for the discharge of a debt;
4. can be transferred, stored or traded electronically; and
5. satisfies such other characteristics as the Authority may prescribe.”

Malta’s Virtual Financial Assets Act 2018 does not provide a specific meaning for payment tokens, however it provide a definition of “virtual financial asset”, which echoes some of the above definitions by defining this as:

“any form of digital medium recordation that is used as a digital medium of exchange, unit of account, or store of value and that is not

1. electronic money;
2. a financial instrument; or
3. a virtual token.”

As seen from the above, the definitions differ in terms of specifying whether the token has the legal status of money or is backed by any central authority. However, broadly speaking, the various terms — virtual currency, payment token, cryptocurrency etc. — are used to indicate a digital representation of value that is used as a means of payment.