When a Cryptocurrency Offering is published on an exchange, the general public has the option to buy the ICO, resulting in a token sale. Tokens are bought by traders who are passionate about the brand behind the ICO, but with that token purchase, the investor may use it how they see fit, whether for trade, as a form of money to buy goods and services or to demonstrate ownership in the company. When a token is posted on an exchanges token listing, it is essential to understand if it is a commodity or a utility. If the token is classified as a Security Token Offering (STO), it will be subject to the Security & Exchange Commission’s (SEC) current securities laws.
What Is the Distinction Between Utility Tokens and a Security Token?
Tokens are created and utilized as financing for an ICO in a distribution, transaction, and circulation capacity on their own blockchain, but they may also be used for investment reasons as a crypto asset/unit of value. Before you buy a token, it’s essential to understand the distinctions between them since the kind of token you invest in, sell, buy, and conduct transactions with may have legal ramifications.
- Utility Tokens
A utility token serves a particular purpose or is utilized for extremely specific services, typically on the same platform on which it was created. For example, if you buy a Podcast Token, you can only use it to pay for podcasts and nothing else. If you wanted to use your Podcast Token to pay for anything other than a podcast, you would have to swap it for cryptocurrency or fiat money. The most frequent kind of token offered by an ICO is utility tokens. Because utility tokens are not regulated, they may be vulnerable to scammers.
- Security Tokens
Security tokens also referred to as equities tokens, are tokens bought that function like shares in the business that is the subject of the ICO. A security token, at its heart, is a work together to build that represents rightful possession of a cryptocurrency and has been validated on the blockchain. To be deemed a security token, a token must satisfy the Howey Test. The Howey Test is comprised of four criteria:
- monetary investment
- in a common business
- with a reasonable expectation of benefits
- gained from the efforts of others. If the token passes the test, it is classified as a security token and is subjected to SEC rules.
How Do You Obtain Listing For Your Token On An Exchange?
When it comes to registering your cryptocurrency on an exchange, there is no uniformity or formula. When launching a cryptocurrency on a crypto exchange, it is essential to examine the many broad aspects involved. Consider the following factors:
Listing a coin on an exchange is time-consuming and may be costly. You may locate the appropriate exchanges for your token by working with the correct person, crypto adviser, or business that can help with the listing.
Different Types of Exchanges
There are two kinds of crypto exchanges token listing to consider when deciding where to publish your currency on a crypto exchange network: decentralized exchanges (DEX) and centralized exchanges (CEX) (CEX). It is necessary to conduct research on the kind of trading and which trade you want to publish your token on, bearing in mind that the greater the trading volume on the exchange, the more likely your token will be approved and listed.
Exchanges that are decentralized
Decentralized exchanges operate independently of any regulatory authority. They are independent, transactions are anonymized, and they operate inside a peer-to-peer (P2P) or purchaser and seller trading network that runs on a blockchain. When bank transfers are used, miners verify the data, and your data is no longer private. DEXs have fees. Some drawbacks of DEXs include the fact that they are symmetric encryption exchanges, thus there is lesser trading volume and liquidity, which may mean it takes more time to locate a buyer/seller or convert cryptocurrencies to fiat money, which is not lucrative for investors.
Exchanges that are centralized
Centralized exchanges function on user-friendly platforms, enabling virtually anybody with money to invest in crypto to try their hand at it. Cass may be crypto-to-fiat exchanges, fiat-to-crypto exchanges, or crypto-to-crypto exchanges. Unlike DEXs, CEXs enable you to buy cryptocurrencies with fiat money through bank transfer or even on credit. Furthermore, CEXs offer greater trading volume and liquidity, allowing you to transfer your cryptocurrency to fiat money fast.