Overview of digital tokens
What is a security token?
"A Security Token is similar to owning stock or an equity interest in an asset, but it can also be a debt instrument. As the name indicates, so-called Security Tokens are themselves securities. This means they demand a more rigorous set of protections for issuers (the people creating and selling the securities) and investors (the people buying the securities).
Launching a Security Token in the crypto community can in itself be a strength because it signals to investors that you are sophisticated enough to be pulling off your project (because you are sophisticated enough to navigate securities filings). Security tokens are typically issued via a Security Token Offering (STO). These offerings come in several different types, each with a different limit on the amount that can be raised, jurisdiction where it may be offered, filing re- quirements, and requirements for investors.
It is important to note that securities laws will apply regardless of whether or not you call your token a security. If it looks like a security, behaves like a security, and is otherwise treated like a security, odds are the Securities and Exchange Com- mission (SEC) is going to consider your token a security. As a result, a number of tokens have been derailed after raising funds without entering the requisite paperwork and filings."
Source: Upside, Taxonomy of Tokens, last revised October 2022