Security Tokens vs. Tokenized Securities

Security Tokens vs. Tokenized Securities: What's the Difference?

The rapid growth of tokenization in the crypto industry has led to some confusion around terminology. Noelle Acheson highlights this in her recent CoinDesk article, emphasizing the need for clearer definitions to fully grasp the potential of this technology.

Understanding the Nuances

While both involve representing assets digitally, security tokens and tokenized securities are distinct. The key difference lies in regulatory compliance and the underlying asset.

Security Tokens: These are digital tokens that represent ownership in a security, like equity in a company or a debt instrument. They are subject to securities laws and regulations.
Tokenized Securities: This refers to the broader process of digitizing existing securities, which may or may not involve creating a new security token. The focus is on the representation of the asset, not necessarily a new type of security itself.

Acheson's article (available here) further explores these distinctions, stressing the importance of precise language for investors, developers, and regulators.

Why Clear Terminology Matters

Precise terminology is critical for several reasons:

Regulatory Clarity: Misunderstandings can lead to compliance issues and regulatory uncertainty.
Investor Protection: Clear definitions help protect investors from scams and misleading information.
Market Development: Accurate language fosters better communication and promotes the healthy growth of the tokenization market.

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Disclaimer: This communication is not directed to investors located in any particular jurisdiction and is not intended to be accessed by recipients based in jurisdictions in which distribution is not permitted. The information herein should not be considered investment advice or the results of actual market experience. Past results are not necessarily indicative of future performance. Trading derivatives products involves the risk of loss. Please consider carefully whether futures or options are appropriate to your financial situation.

Security Tokens vs. Tokenized Securities