What is a security token in cryptocurrency?

A security token is a type of cryptocurrency token that represents ownership or a stake in an underlying asset, such as equity in a company, real estate, or a revenue-generating project. Security tokens are regulated by securities laws, which means they must comply with the relevant regulations in the jurisdictions where they are issued. Unlike utility tokens, which grant access to a product or service, security tokens are treated like traditional securities, offering investors a share of profits or voting rights. The regulatory framework around security tokens helps ensure investor protection and offers more legal clarity for issuers compared to unregulated token offerings, such as Initial Coin Offerings (ICOs).