Today, the term “digital asset” is increasingly used in publications about both economic development and new technologies. However, until recently, it did not have a precise definition due to the diverse interpretations.
The word “digital” initially meant information expressed as numbers. In turn, from an economic point of view, the word “asset” means any subject of objective reality that has a certain value for its holder. The world, however, is ever-changing and the development trends of economic sectors, financial technologies and the reforms of legal regulations should be taken into account to define the concept of a digital asset.
Thus, a digital asset is fundamentally different from a cryptocurrency, since the latter is not backed by real assets and is highly volatile. As a result, it is difficult to forecast changes in its price. All of the above creates obstacles to the implementation and use of cryptocurrencies in the real economy.
We all know the situation with the TON blockchain project, in which the creators, investors and SEC suggested conflicting definitions of legal support for the Gram token, while it was initially developed for use in economic activities, including in the United States. The project founders made a serious mistake: they neglected the elaboration of the legal component of the project and pretesting of the token, which is why it was equated with securities.
This example clearly shows that today the digital economy, startups and investors need obvious principles for determining the category of a particular type of token. A number of countries are concerned about the rapid development of digital currencies and the possibility of their regulation under international law. Developing tests to evaluate and classify the token was the first attempt to solve the problem.
The following tests deserve consideration: the Howey Test, the MFSA Test, the FINMA ICO Guidelines (Swiss Test), and the Digital Asset Test.
1. Howey Test
This test was developed under the Securities Act by the US Supreme Court. The TON project was evaluated according to it. In short, the Howey Test offers to answer the questions about the availability of the investment component of the token, further profit from investments and the possibility of its conversion.
As a result, the token, the exchange rate of which is influenced by the issuer, is recognized as the security and this token actually influences the investors’ profit.
2. The MFSA (Malta Financial Services Authority) considers this issue from a different perspective. One of the main criteria of its test is whether a virtual token has its own value, i.e. if it can be used outside the blockchain or not. If the answer is yes, the EU law on financial instruments applies.
3. The FINMA ICO Guidelines (Swiss Test)
As is known, Switzerland actively supported the ICOs. A need for its own classification arose in this regard. The regulator represented by FINMA distinguishes three types of tokens:
. Payment tokens.
They can be used as a means of payment, but do not imply profit. These tokens are regulated in accordance with the Anti-Money Laundering Act.
· Utility tokens.
They are intended to provide digital access. Their goal is to increase the security of using the service.
· Asset tokens.
In terms of their economic function, the tokens are analogous to equities, bonds or derivatives. They entitle the owners to dividends or interest.
In comparison with the above-mentioned approaches, this one is quite transparent and the most attractive for innovative blockchain projects and investors.
4. The Methodology for Determining Whether a Blockchain Token Corresponds to a Digital Asset developed by Alexander Kud is a special methodology made as a questionnaire. Answering 18 questions about the blockchain token allows determining whether this token can be classified as a digital asset or not. The test is based on mathematical calculations and analysis of the blockchain token properties and makes the asset a more understandable tool for current legislation.
In conclusion, it is worth noting that testing a blockchain token is obligatory. Neglecting this process leads to the unfortunate consequences of financial loss. Taking into account the recent precedents, cryptocurrency in its original form is a thing of the past. Blockchain projects and people interested in profit or using tokens in economic activities should rely on current legislation.