Not financial, legal, or tax advice. Some token categories carry securities-law implications that vary by jurisdiction.
Crypto tokens generally fall into three functional categories: utility tokens that grant access to a service, security tokens that represent an investment contract or ownership stake, and governance tokens that grant voting rights over a protocol. The category shapes both how a token is used and how it may be regulated, building on \[pillar hyperlink: What Are Crypto Tokens\].
Three categories
Utility tokens are designed to be used within a specific platform, like paying for a service or unlocking a feature. Security tokens represent a financial interest, similar to a share or bond, and are treated accordingly under securities law in many jurisdictions. Governance tokens give holders voting power over decisions in a decentralized protocol.
Examples
A token used to pay network fees or access a specific app's features is typically utility-focused. A token representing fractional ownership of a real-world asset leans toward a security. A token that lets holders vote on a DeFi protocol's parameters is a governance token.
Regulatory notes
Whether a given token counts as a security depends on the specific legal test applied in each jurisdiction, not just its marketing label. This is an evolving and often contested area, and classification can have real consequences for how a token is issued and traded.