Regulation explainerTokenisation

Is my token a security? How the US, EU and UK classify tokens

Regulators classify a token by what it gives the holder and how it is sold, not by what it is called. This explainer, checked against the sources listed at the review date shown, sets out how the US, the EU and the UK separate securities, e-money and stablecoins, other crypto-assets and unregulated tokens. It shows which design choices move a token between categories and lists the questions to take to counsel. It is educational, not legal advice.

Reviewed 10 October 2026 7 min read

On this page

Why classification comes before architecture
Design features that move a token between categories
How the US, EU and UK draw the lines
Educational, not legal advice
Four hypothetical tokens across three regimes
What each classification sets in motion
Questions to bring to counsel
Questions and answers
Sources

Why classification comes before architecture

A token's category decides who may issue it, what document must accompany an offer, who may hold it in custody, where it may trade and what the issuer is liable for. It also shapes the architecture. A security token typically needs eligibility checks and transfer restrictions, an e-money token needs redemption at par, and a consumer entitlement may need neither. Designing first and classifying later usually means designing twice.

This page explains the logic of the three regimes so a product team can have a better first conversation with counsel. Positions, particularly in the US, have changed quickly, so check each source against its current version before relying on it.

Design features that move a token between categories

Feature	Pushes towards a security or financial instrument	Pushes away from one
Economic return	A share of revenue, profit, interest or asset growth	No return beyond using a product or service
Reliance on others	Value depends on the issuer or a promoter building and running the project	Value comes from a working network or product the holder can use now
Redemption	Redeemable for a share of assets or a fixed return	Redeemable only for goods or services; at-par redemption for fiat points to e-money or stablecoin rules instead
Transferability and marketing	Freely tradable and marketed as an investment	Non-transferable, or transferable only inside a closed network
Governance rights	Votes tied to economic rights, as with shares	Votes over protocol parameters with no claim on profits
Fungibility	Interchangeable units issued in a series	Genuinely unique items, though large or fractionalised series may be treated as fungible

No single feature decides the outcome. Regulators look at the whole arrangement, including the marketing and the expectations it creates.

How the US, EU and UK draw the lines

Each regime starts from its securities law and then adds categories specific to crypto-assets.

US federal securities laws, the Howey test and the SEC's interpretive release on crypto assets

United States

Applies whenA token is offered or sold in a way that creates an investment contract, or the token is itself a security such as a share or note¹².

Under the Howey test, an investment contract is an investment of money in a common enterprise with an expectation of profits from the efforts of others². Law-firm summaries note that the SEC's release applies that test rather than replacing it⁸.
The SEC's interpretive release of March 2026, which the CFTC joined, sets out a taxonomy of digital commodities, digital collectibles, digital tools, stablecoins and digital securities, and explains how a non-security asset can become subject to an investment contract and later separate from it¹.
Securities must be registered or sold under an exemption, with trading, custody and intermediaries under securities rules; certain non-security crypto assets may be commodities within the CFTC's remit¹.
Payment stablecoins have a separate federal regime under the GENIUS Act, covered in the stablecoin regulation explainer.

MiFID II (Directive 2014/65/EU) and MiCA (Regulation (EU) 2023/1114)

European Union

Applies whenA crypto-asset is offered to the public or admitted to trading in the EU, or a crypto-asset service is provided there³⁴.

First test whether the token is a MiFID II financial instrument, such as a transferable security⁴. ESMA's guidelines on qualifying crypto-assets as financial instruments ask firms to look at substance over form⁵.
If it is not, MiCA sorts it into e-money tokens, which reference one official currency, asset-referenced tokens, which reference other values or a combination, or other crypto-assets³.
MiCA does not apply to financial instruments, deposits, funds or securitisation positions, among others, nor to crypto-assets that are unique and not fungible with other crypto-assets³.
E-money tokens may be offered only by credit institutions or e-money institutions, asset-referenced tokens need authorisation, and other crypto-assets need a white paper for public offers unless an exemption applies³.

FSMA perimeter, the FCA's Guidance on Cryptoassets (PS19/22) and the Cryptoassets Regulations (SI 2026/102)

United Kingdom

Applies whenA cryptoasset activity is carried on in the UK, or a cryptoasset is offered or promoted to people in the UK⁶⁷.

The FCA's guidance sorts tokens by where they sit in the perimeter: security tokens that are specified investments, e-money tokens under the E-Money Regulations, and tokens outside regulation⁶.
The Cryptoassets Regulations add regulated activities such as issuing qualifying stablecoin, and regimes for public offers and admissions to trading of qualifying cryptoassets⁷.
Most of those Regulations are due to come into force on 25 October 2027, and HM Treasury has proposed amendments, so confirm the current text and the FCA's application windows before relying on dates⁷.

Educational, not legal advice

Four hypothetical tokens across three regimes

Illustrative only. Each outcome could change with different facts, documents or marketing.

Hypothetical token	United States	European Union	United Kingdom
Revenue-share token paying holders part of platform income	Likely an investment contract, so a security	Likely a transferable security under MiFID II, so outside MiCA	Likely a security token and a specified investment
Gift-card token redeemable only with one retailer	Unlikely to be a security; state gift-card and money-transmission rules need checking	May qualify for MiCA's limited-network exemption from the white paper; check e-money rules	Likely outside the perimeter if limited to the issuer's goods; check e-money rules
Governance token with protocol votes and no profit rights	Depends on how it was sold and whether buyers rely on a core team	Usually an other crypto-asset, needing a white paper for public offers	Usually unregulated today; may become a qualifying cryptoasset under the new regime
Tokenised fund unit	A security; tokenising it changes nothing about that	A financial instrument under MiFID II, outside MiCA	A specified investment, with existing fund rules and permissions

These outcomes are reasoned from the instruments above and are not legal conclusions.

What each classification sets in motion

If
The token is a security or financial instrument.
Then
Plan for a registered or exempt offer, a prospectus in the EU unless an exemption applies, licensed intermediaries and venues, and securities-grade custody.
Tokenising a security changes how it is recorded, not what it is.
If
The token is an e-money token or a stablecoin.
Then
Issue only through an entity entitled to issue it, and design for redemption at par.
Licensing and reserves are prerequisites, not features of the software.
If
The token is an other crypto-asset under MiCA.
Then
Prepare a MiCA white paper for public offers unless an exemption applies; see MiCA white paper requirements.
For these tokens the white paper and its liability regime take the place of a prospectus.
If
The token sits outside financial regulation.
Then
Still check consumer-protection, gift-card, e-money, tax and data-protection rules, and stop the design drifting into a regulated category.
Adding yield, cash redemption or investment marketing later can reclassify it.

Questions to bring to counsel

0 of 7 checked

In which jurisdictions will we offer, market or admit the token to trading?
Does any holder right depend on our efforts, our profits or our assets?
Is the token redeemable, and for what: cash, goods, services or a share of assets?
Who can buy it, and can holders transfer it freely?
Could planned features, such as staking rewards or buybacks, change the category?
Which licences do we and our partners hold, and which would the likely category need?
What marketing language is off limits given the likely category?

Questions and answers

Does a permissioned network change a token's classification?

No. Classification turns on the rights a token carries and how it is offered, not on the ledger it runs on. A security stays a security on a private network. A permissioned network can make compliance easier by limiting holders to eligible investors, and some rules concern the infrastructure that records securities, but the token's category does not change with the ledger.

Can a token change category over time?

Yes. In the US, the SEC's current interpretation describes how a non-security crypto asset sold subject to an investment contract can later separate from it¹. In any regime, adding features such as yield, buybacks or cash redemption can move a token into a more regulated category. Review the classification whenever the token's rights or its marketing change.

Can NFTs be securities?

They can. Uniqueness helps but does not settle the question. MiCA excludes crypto-assets that are unique and not fungible with others³, yet large or fractionalised collections may be treated as fungible, and an NFT marketed as an investment in a project's success may be an investment contract in the US. Look at what the holder receives and how the item was sold, not at the token standard.

Is a utility token automatically outside securities law?

No. Calling a token a utility token has no legal effect. If buyers purchase it expecting the issuer's efforts to raise its value, US law may treat the sale as an investment contract, and in the EU it would at least be a MiCA crypto-asset needing a white paper for public offers. A working product at launch, consumptive use and restrained marketing all point away from securities treatment.

Sources

SEC Clarifies the Application of Federal Securities Laws to Crypto Assets (press release 2026-30, 17 March 2026) — US Securities and Exchange Commission · checked 10 October 2026
SEC v. W.J. Howey Co., 328 U.S. 293 (1946) — Justia US Supreme Court Center · checked 10 October 2026
Regulation (EU) 2023/1114 on markets in crypto-assets (MiCA) — EUR-Lex · checked 10 October 2026
Directive 2014/65/EU on markets in financial instruments (MiFID II) — EUR-Lex · checked 10 October 2026
MiCA Level 2 and Level 3 measures, listing the Guidelines on the qualification of crypto-assets as financial instruments (ESMA75453128700-1323) — ESMA · checked 10 October 2026
PS19/22: Guidance on Cryptoassets — Financial Conduct Authority · checked 10 October 2026
The Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026 (SI 2026/102) — legislation.gov.uk · checked 10 October 2026
SEC Issues Interpretive Guidance on Crypto Asset Classification — Orrick · checked 10 October 2026

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