Kokila Alagh, the managing partner at Mahmood Hussain Law Firm talking about security vs Utility token’s
Across the jurisdictions, the focus now needs to shift from an amateur debate on ‘whether or not the cryptocurrencies are a viable mode of payment’, to a more pragmatic dialogue of understanding the efficacy and implementation of the underlying technology, with a regulated but accommodating approach. While a layman’s understanding of the initial coin-offerings could be that, it is an easier way of raising funds, truth be told, it is much more complex than that. The tokens issued in return for such funds or other contributions, can act as either a security or a utility to the token holders which can further be used, or traded on the decentralized apps or cryptocurrency exchanges.
While multiple regulators have come up with their own nomenclature, broadly the tokens are divided into two categories: utility tokens and security tokens. The utility tokens are not intended to take a form of an investment and the users can merely gain access to a company’s products or services by using them. Security tokens on the other hand derive their value from external factors, could be backed by assets and usually get a treatment equivalent to that of a security before the regulators.
At a recent panel discussion incubated by KryptoLabs Abu Dhabi, Kokila Alagh, the managing partner at Mahmood Hussain Law Firm, Dubai discusses the above while also giving a word of caution that “cryptocurrency is no longer a thing of the future, it’s the present.. and the regulators around the globe will have to accept it.. they don’t have a choice..”