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Beyond “Security or Commodity”: Different Types of Digital Assets | Moore & Van Allen LLC

By on August 17, 2022 0

In a previous article, we discussed recent proposed rules from the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) regarding certain nonpublic information reported to the SEC and CFTC in the PF form. Most of the rule deals with information and requirements that are not related or focused on digital assets. However, in one part, it is proposed to request information from private funds about their “digital assets”.

The SEC and CFTC definition of “digital assets” is broad and all-encompassing. As a result, regulators have asked for comment on “Should we require more specific disclosure of what each digital asset represents? »

We only raise this point here for a pause. Often discussions about the classification of a digital asset only focus on the regulatory implications of “Is it security? Is it a commodity? Is it both?Forgotten, could be the fact that the types and uses of digital assets continue to grow and seem to be limited only by the creativity and ingenuity of developers as more and more uses are made by developers and A digital asset can be a currency itself on a particular network/distributed ledger (e.g. ETH), a more general store of value, or a means of exchanging value (e.g. BTC), but more generally, a digital asset can represent anything from an asset (e.g. wrapped tokens), to a right of access, right to a picture of a monkey on a board, or a fraction of a work of art, or a ticket to a concert.

Additionally, several different properties can be used to categorize different token use cases (e.g., protocol tokens vs. application tokens, fungibility, transferability, provisioning, token flow, stability, etc.).

It’s also important to appreciate all of this to understand not only where we are today, but also where things could go, and then use that information to develop strategies, analysis and advice.

To help give readers an idea of ​​the potential reach of “digital assets,” the table below provides a few use cases that are relevant to the DeFi/financial services space and are already operational or in development. . However, since there is no generally accepted and widely used terminology in the discipline regarding the types of digital assets, our summary is only one way of looking at this world.

Types of digital assets are grouped based on key characteristics. However, the different typologies described below are not mutually exclusive and some use cases may fall into more than one category.

*for a more comprehensive list see https://kiffmeister.com/2022/08/09/retail-central-bank-digital-currency-current-landscape/