Security tokens may be sold or auctioned in an Initial Coin Offering (ICO) or an Initial Token Offering (ITO). These “Token Generating Events” are used to raise funds for an idea or a business model. Interested supporters can buy tokens with regular currency or another cryptocurrency. The token likely has no value at the time you buy it but may be exchangeable in the future for a new cryptocurrency to be launched by the project, or a discount or early rights to a product or service proposed to be offered by the project. Because there are no guarantees or certainty that the token will have any future value or that the project will succeed, investors should be very cautious when buying into an ICO. The level of disclosure and information available is typically far less than would be available for a typical investment opportunity. Investors should be prepared to lose some, or all, of their original investment.

Depending on the circumstances of the ICO, the tokens may be securities. If they are, then they may be subject to securities law.

You can purchase cryptocurrency directly, receive immediate delivery of the assets and deposit them into your digital wallet or physical data storage device. A digital wallet is an online service that stores your cryptocurrency and allows you to conduct transactions, such as buying goods or services, or trading or transferring your virtual currency. You have sole control over your digital wallet, but risk losing access to your crypto assets if you forget your password, accidentally delete your wallet or are the victim of hacking.

Physical hardware devices designed for storing crypto assets, often referred to as “cold wallets,” are often a secure way to store crypto assets because they are not connected to the internet.

Crypto asset trading platforms (CTPs) are online applications or systems that bring together buyers and sellers of crypto assets to facilitate transactions or trades.

Some CTPs provide a platform for users to buy and sell crypto assets and receive immediate delivery of these assets into their own wallets. This means that the user makes the purchase and the platform has the obligation to deliver the crypto assets directly to the individual, who stores them in their own wallet, over which they retain full control.

Some CTPs retain custody of the crypto assets in a wallet controlled by the CTP. This creates a dependency or reliance on the platform by the user. The user’s crypto assets are stored on the platform and the platform retains control over the assets until the user transfers them off the platform, either into their own wallet or by receiving an equivalent value in fiat currency.