While the terminology differs quite significantly across jurisdictions, the definitions relating specifically to “payment tokens” largely mirror each other as being a means of payment.
The Financial Conduct Authority (FCA) uses the term “exchange tokens”, noting that “these tokens are sometimes known as ‘cryptocurrencies’, ‘crypto-coins’ or ‘payment tokens’”, and defines this as tokens that are:
“not issued or backed by any central authority and are intended and designed to be used as a means of exchange. They tend to be a decentralised tool for buying and selling goods and services without traditional intermediaries.”
The Financial Action Task Force (FATF) defines “virtual currencies” (as distinct from fiat currency, e-money, and digital currencies which can cover digital representations of either virtual currency (non-fiat) or e-money (fiat)) as:
“a digital representation of value that can be digitally traded and functions as (1) a medium of exchange; and/or (2) a unit of account; and/or (3) a store of value, but does not have legal tender status (i.e., when tendered to a creditor, is a valid and legal offer of payment) in any jurisdiction.”
In the EU Fifth Anti-Money Laundering Directive (5AMLD), “virtual currencies” is defined as:
“a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically.”
In Switzerland, FINMA considers “payment tokens” as being synonymous with cryptocurrencies, and defines these as:
“tokens which are intended to be used, now or in the future, as a means of payment for acquiring goods or services or as a means of money or value transfer. Cryptocurrencies give rise to no claims on their issuer.”
Singapore’s Payment Services Act 2019 defines “digital payment token” as:
“any digital representation of value…that —
- is expressed as a unit;
- is not denominated in any currency, and is not pegged by its issuer to any currency;
- is, or is intended to be, a medium of exchange accepted by the public, or a section of the public, as payment for goods or services or for the discharge of a debt;
- can be transferred, stored or traded electronically; and
- satisfies such other characteristics as the Authority may prescribe.”
Malta’s Virtual Financial Assets Act 2018 does not provide a specific meaning for payment tokens, however it provide a definition of “virtual financial asset”, which echoes some of the above definitions by defining this as:
“any form of digital medium recordation that is used as a digital medium of exchange, unit of account, or store of value and that is not
- electronic money;
- a financial instrument; or
- a virtual token.”
As seen from the above, the definitions differ in terms of specifying whether the token has the legal status of money or is backed by any central authority. However, broadly speaking, the various terms — virtual currency, payment token, cryptocurrency etc. — are used to indicate a digital representation of value that is used as a means of payment.