During the last year, some of the best performing coins in the crypto market were those created by exchanges. Although most of them are considered utility tokens, they should be treated as securities. This is according to a recent report released by Astronaut Capital, a leading asset-manager for virtual currencies.
Securities or Utility Tokens?
The report explains that crypto exchanges consider that their digital assets can be used to pay for exchange fees, withdraw fees and listing fees. Although these things provide utility to the tokens, these have not been good for investors.
One of the currencies affected by this issue is Qash, the cryptocurrency launched by the crypto exchange Liquid. The digital currency moved from over $800 million market capitalization to $40 million a few months ago.
Binance has also launched its Binance Coin (BNB) back in 2017. Users can use the BNB tokens to pay for fees and participate in exchange promotions, among other things. At the same time, Binance burns BNB each quarter based on the trading volume on the crypto-to-crypto platform.
Astronaut Capital explains that the term “burn” can be considered share buyback and retirement. This is what companies do according to their profitability over a certain period of time.
Regulators should start to pay close attention to these issues because some coins suddenly have different characteristics from both securities and utilities. These digital assets, including Binance BNB, Huobi HT and Kucoin KCS had very good returns compared to other digital currencies in the market, which is very positive for investors.
The report reads as follows:
“So is it a security? Despite what your views may be, the quarterly buyback and burn has been a hit amongst exchanges since it first came out, and the returns are proving to be juicy.”
Exchanges have been very profitable in the cryptocurrency market and the report is bullish about them. However, it is important to understand what investors are dealing with and what to expect from regulatory agencies around the world.
Binance Coin, one of these exchange currencies, experienced a large price increase this year. The virtual currency moved from $4.5 in December 2018 to $38 a few months ago, surpassing its previous all-time high of $24.5 in January 2018.
Currently, Binance Coin is being traded around $27.6 according to CoinMarketCap and it has a market cap of $4.29 billion.
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