Overview of digital tokens

What are digital tokens (DTs)?

"A digital token is a cryptographically-secured representation of a token-holder's rights to receive a benefit or to perform specified functions. A virtual currency is one particular type of digital token, which typically functions as a medium of exchange, a unit of account or a store of value."
Source: Simmons & Simmons, last revised 15 Aug 2017

There are three kinds of digital tokens recognised by IRAS, and their definitions are as follows:

According to IRAS (e-Tax Guide)
last revised 9 October 2021

3.1 Digital token
A digital token refers to any cryptographically-secured digital representation of value that can be transferred, stored or traded electronically.

3.2 Payment token
A payment token represents a digital right that can be used or is intended to be used as a means of payment for goods and/or services. Common payment tokens include Bitcoin and Ether.

3.5 Security token
A digital token that represents a stake or an investment in an underlying asset e.g. shares in company, bonds, etc.

3.6 Utility token
A digital token that represents a right to a good or service.

2.3 The general tax treatment for transactions involving the use of payment tokens, utility tokens and security tokens are as follows:

Type of digital token  Tax Treatment 
Payment token Payment token is regarded as an intangible property. Consequently, transactions involving the use of payment tokens as payment for goods or services are viewed as barter trade and the value of goods or services transferred should be determined at the point of transaction.
Utility token  The use of a utility token to exchange for goods or services is unlikely to create an income subject to tax on the user at the point of exchange. It may, on the other hand, give rise to a deductible expense subject to usual deduction rules. 
Security token  The taxability of the return derived from a security token depends on the nature of the return, for example, whether it is in the form of interest, dividend or other distributions.


2.5 For guidance on GST treatment of transactions involving digital payment tokens, please refer to the IRAS e-Tax Guide “GST: Digital Payment Tokens”.