How Does the Concept of a “Security Token” Differ from a Utility Token in Terms of Regulation?

A utility token is designed to provide access to a product or service within a decentralized network, and its primary purpose is functional, not investment-driven. A security token, however, represents ownership in an external asset, such as equity, debt, or real estate, and is subject to traditional securities regulations (like the Howey Test in the US).

Security tokens must comply with KYC/AML rules and are generally only offered to accredited investors, making them fundamentally different from unregulated utility tokens.