Utility Token VS Security Token
In contrast to utility tokens, security tokens represent ownership of a digital or liquid contract that is a fraction of an asset that already has value.
That asset could be a piece of real estate, a home a company or something else.
Whatever the asset is, the security token represents a real ownership of the asset – even a non-cryptocurrency asset.
Many companies selling a new cryptocurrency will execute an ICO to disperse coins for the currency and raise its value. But ICOs are not limited to cryptocurrencies. In fact, many security tokens are sold for ownership of non-crypto assets.
Basically, they represent a way that companies call sell stock in a digital form on the cryptocurrency market. An ICO allows for broad ownership of a commodity, and because coins can represent very small monetary value, it makes the investment entry point low – and coin ownership accessible to a wide population.
Security tokens also represent the convergence of the cryptocurrency market with the more traditional financial industry. They provide a bridge for owners of non- cryptocurrency commodities to sell fractions of those assets to people who want to diversify their cryptocurrency portfolio.
Security coins represent a specific investment, so they are regulated in the United States by the SEC.