Digital token

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A digital token is a digital code, such as a hash, which is used to store or represent important information. It is a type of digital asset.[1][2]

While cryptocurrency is technically a type of digital token, not all digital tokens work the way cryptocurrencies do. Some digital tokens exist within enclosed digital environments - they cannot be traded and have no value outside of their native program or platform. For example, a customer loyalty rewards program in Russia for Burger King uses digital tokens to track the number of purchases a customer makes, in order to reward them with a free hamburger after a certain number of purchases. However, these tokens hold no cash value and cannot be traded for other digital tokens.[3][4]

Regulation

In April 2019, the U.S. SEC issued an official "no-action" letter to a U.S. company called TurnKey Jet, Inc., a company that plans to sell digital tokens to people who sign up for its membership program. According to TurnKey, these tokens can be used to charter a private jet, can only be traded among members of the program, and cannot be bought back for a premium. In the letter, the SEC stated that its "no-action" policy was contingent upon several rules, including, "TKJ will restrict transfers of Tokens to TKJ wallets only, and not to wallets external to the platform." This was the first time that the SEC issued such a letter to a company offering digital assets.[5][6]

References