Active development of the global digital economy contributed to the emergence of a number of new terms and definitions. Special attention is paid to defining blockchain tokens. Electronic currencies, virtual assets, cryptocurrencies, digital assets — these new financial instruments still have no definition. How can you sort through numerous concepts and identify the most important ones?
Main Definition
Today, there is no specific definition of the term “digital asset”. This is why the main idea of the term is complicated, which leads to misrepresentation or incorrect description of this information. The following definition is considered the most complete: digital asset means an information resource derivative of the right to a value and circulating in the distributed ledger in the form of a unique identifier.
Analyzing the legal and regulatory framework, we can conclude that international institutions, SEC institutions in particular, do not currently use the term “digital asset”. Meanwhile, the ESMA uses the term “cryptocurrency asset”. Such assets include any digital representation of interest that has a value and the right to receive benefit or the fulfillment of certain functional tasks.
Later on, aiming to define a new type of an instrument, a number of tests and options for regulating it were created.
Howey Test
The Howey Test is a kind of a formula, according to which we can identify whether certain transactions can be classified as an “investment contract”. When defining any financial instrument as a security, we have to check its correspondence to the following criteria:
- investment of funds;
- investment into the common venture;
- expectation of a certain amount of profit by the investor.
ICO Guidelines From FINMA
Afterwards, when popularizing the ICOs (Initial Coin Offering), a need to regulate this process arose. Thus, the financial regulator of Switzerland, FINMA, published clear recommendations for ICOs. The guidelines include information needed for sound resolution of all issues regarding the ICO by the regulator.
According to the classification of the regulator, there are several types of tokens:
· Payment tokens.
They are used as means of payment or exchange.
· Utility tokens.
This type of tokens provides the owner with a digital access to services of a blockchain-based project.
· Asset tokens.
They act as an obligation for the issuer, an equivalent to the right of a shareholder.
Methodology for Determining Whether a Blockchain Token Corresponds to a Digital Asset
Last year, the representatives of the Ukrainian IT sector proposed a test for a blockchain token’s correspondence to a digital asset. The methodology was developed in accordance with certain criteria and indicators of a blockchain token. Its questionnaire contains 18 questions, and the answers allow comparing the characteristics of a blockchain token to a digital asset. Based on the results of the test, we can determine the level of a blockchain token’s correspondence to the categories of a digital asset.
When talking about the developments in this area, we have to mention the expert research works in the field of developing blockchain and establishing digital assets carried out by Alexander Kud. The substantiation of the term “digital asset” helped determine the components of this definition by analyzing its essence.
Conclusion
Studying the matter of defining digital assets, their legal regulation and development in the world, we see that this is a kind of a “revolution”. The revolution in the financial world, which already bears fruit.