How Do Regulatory Classifications Affect the Liquidity of a Token? ▴ Learn

How Do Regulatory Classifications Affect the Liquidity of a Token?

Tokens classified as securities often face stricter regulations, such as mandatory registration and compliance with 'Know Your Customer' (KYC) and 'Anti-Money Laundering' (AML) rules. This can limit the number of exchanges willing to list them, especially in the US, and restrict the pool of eligible investors.

These limitations generally result in lower trading volume and reduced market liquidity compared to widely traded utility tokens. Compliance adds cost and complexity to the trading process.

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