Cryptocurrency encompasses a wide range of digital assets, including payment tokens, utility tokens, and security tokens. In 2025, cryptocurrency’s worldwide market cap hit a record high of over $4 trillion.

Below, we’ll discuss the three major cryptocurrency token categories, their risks and benefits, and how to decide which ones are best for your business.

What’s in this article?

• What are the different forms of cryptocurrency?
  
• How do payment tokens function?
  
• How do utility tokens function?
  
• How do security tokens function?
  
• What risks apply to each token type?
  
• How can organizations choose which tokens to support?
  
• How Stripe can help
  

What are the different forms of cryptocurrency?

When Swiss regulators began examining the expansion of initial coin offerings from 2017–2018, they adopted a three-part classification framework to assess crypto tokens. Tokens were sorted into payment tokens, utility tokens, and asset tokens (also often called security tokens). These categories have been solidified and continue to expand, with some tokens serving multiple functions simultaneously.

Here’s a closer look:

• Payment tokens: They’re the digital money side of crypto, including Bitcoin and stablecoins. The latter are designed to hold a steady value and are often pegged to fiat currencies such as the US dollar. These can move across the internet with fewer price swings than traditional cryptocurrencies.

• Utility tokens: They provide access to something inside a specific platform or network. They might pay for storage on a decentralized service, let you run transactions on a smart contract blockchain, or act as in-app currency inside a platform. These tokens get their value from what they let you do, not from ownership in a business or asset.

• Security tokens: These represent a stake in something outside the blockchain, such as equity in a company, share of revenue, or slice of a real-world asset. They’re meant to behave more like digital versions of stocks or bonds.

How do payment tokens function?

Payment tokens are meant to make value transfers anywhere as easy as sending an email. When someone sends a payment token, a distributed blockchain network validates and records the transaction. Settlement happens on the chain, usually within seconds or minutes, and the network itself (rather than a bank) updates the ledger.

Stablecoins, a type of payment token, are structured to maintain 1:1 pegs with their fiat currencies and reserve assets that support those pegs. Their usefulness depends on those reserves being real, well managed, and transparent. A stablecoin transfer can arrive within minutes and at low cost, which is why it’s become useful in cross-border payouts, remittances, and supplier payments. Stripe supports stablecoin-based payments and settles them in the currency businesses choose so organizations get the benefits of blockchain settlement while they operate in a familiar financial setup.

How do utility tokens function?

Utility tokens give holders access to something specific inside a blockchain-based system.

Here are their main uses:

Access to products and services

Many utility tokens serve as a kind of digital key. For example, a decentralized storage network might require payment in its token to store files, while the individuals who provide storage earn that same token in return. In these systems, the token is the mechanism that keeps the marketplace running. If demand for the service grows, demand for the token often grows with it.

Fuel for smart contract networks

On smart contract blockchains, the network’s native token often helps the platform function. Ether, for instance, is the token you use to pay “gas” to run computations on Ethereum. Every action—deploying a contract, transferring a non-fungible token (NFT), or executing a trade—consumes small amounts of Ether to pay for the computation. This creates a built-in cost that protects the network from spam and allocates resources fairly.

In-app currency

Some tokens are created to power the internal economy of an app, game, or platform. A token might be needed to buy digital land, pay creators, or reward users for certain actions. The Basic Attention Token, for example, flows through an advertising system that pays users for their attention and pays publishers for engagement. Without the token, the incentives wouldn’t align.

Governance

A growing share of utility tokens also comes with governance rights (which is why they’re also considered governance tokens). Holding them gives participants a vote on parameters, upgrades, and other decisions that shape the network’s future. MakerDAO’s MKR token is a good example. Holders use it to guide the system that maintains the Dai stablecoin.

How do security tokens function?

Security tokens represent real ownership in something that exists outside the blockchain. They carry the rights and obligations of a security while living on a programmable blockchain ledger.

Here’s how they’re used:

Digital representations of real ownership

A security token can function like a digitized share certificate. A company might issue a fixed number of tokens, with each representing a slice of equity or claim on future profits. If you hold those tokens, you hold those rights. Smart contracts can also encode details such as dividend distribution, voting eligibility, and transfer restrictions, which automates some mechanics that would typically require manual administration.

Built-in compliance

Because these tokens represent securities, they’re governed by securities laws. Transfers could be restricted to approved investors or require that holders pass certain identity checks. Some tokens enforce lockup periods or legally mandated holding requirements. Instead of relying on external registrars or transfer agents, the token itself can sometimes enforce these rules through code. This helps reduce administrative overhead but raises expectations for the technical and legal architecture.

Linking the blockchain to real-world assets

Security tokens are often backed by assets whose value is shaped by real-world performance. A tokenized equity stake rises and falls with the company’s trajectory. A token tied to a piece of property tracks its value and whatever income it generates. This means security tokens don’t behave like speculative utility tokens because their economic stories follow the assets.

Organizations typically issue security tokens as a way to raise capital or offer fractional ownership in assets that are harder to divide using traditional infrastructure. Tokenization can expand the pool of investors, open secondary trading windows for previously illiquid assets, and speed up settlement processes. It can also introduce new responsibilities, since issuers must maintain regulatory compliance across jurisdictions, keep disclosures up-to-date, and ensure trading happens only where it’s legally allowed.

What risks apply to each token type?

Each category of cryptocurrency presents different risks based on how the token works and what it’s used for.

Here’s what to watch for:

Payment token risks

Traditional payment tokens like Bitcoin come with price volatility. Many companies avoid that exposure by converting them to fiat immediately or using stablecoins.

Stablecoins minimize volatility but introduce reserve risk. Their stability depends on how well the issuer maintains the assets that back the token. Failures such as the 2022 collapse of TerraUSD, an algorithmic stablecoin that was pegged to the US dollar, show how quickly confidence can fall.

Payment tokens also face regulatory and security risks. Rules vary by country, and businesses must account for Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements as well as tax obligations. On the technical side, safeguarding wallets and monitoring network-level vulnerabilities remain core responsibilities.

Utility token risks

Utility tokens carry project and adoption risk because their value depends on the underlying platform’s success. If the network doesn’t gain traction or suffers a technical failure, the token’s usefulness and market value can evaporate. Utility tokens are often thinly traded and highly volatile, which creates liquidity challenges. Smart contract bugs or protocol exploits can also disrupt or devalue a token overnight.

Security token risks

Security tokens inherit the performance risk of the assets they represent. If the business or asset underperforms, so does the token. They also bring a heavier compliance load since issuers must follow securities laws and restrict trading to eligible participants.

These tokens often trade on specialized platforms rather than mainstream exchanges, which can limit liquidity. And while they live on blockchain, they still depend on smart contracts, custodians, and technical infrastructure.

How can organizations choose which tokens to support?

Businesses should think in terms of customer needs and regulatory boundaries when they choose which tokens to support.

Here’s a clear decision framework:

• Start with your audience and use case: Tokens are effective only if customers will use them. Fiat-backed stablecoins often make sense for international payouts or cross-border commerce, while crypto-native audiences might expect support for widely adopted currencies like Bitcoin and Ether.

• Prioritize stability, liquidity, and reliability: Currencies backed by high-quality liquidity assets are easier to convert, reconcile, and account for, which is why stablecoins have become a crypto entry point for many businesses.

• Check regulatory fit: Each token type comes with different compliance expectations, from AML and KYC workflows to potential securities law requirements.

• Use established infrastructure when possible: Payment providers like Stripe can support stablecoin-based payments and settle funds in a business’s preferred currency. This reduces exposure to custody, volatility, and on-chain risk.

How Stripe can help

Stripe Payments provides a unified, global payment solution that helps any business—from scaling startups to global enterprises—accept payments online, in person, and around the world. Businesses can accept stablecoin payments from almost anywhere in the world that settle as fiat in their Stripe balances.

Stripe Payments can help you:

• Optimize your checkout experience: Create a frictionless customer experience and save thousands of engineering hours with prebuilt payment UIs and access to 125+ payment methods, including stablecoins and crypto.

• Expand to new markets faster: Reach customers worldwide and reduce the complexity and cost of multicurrency management with cross-border payment options, available in 195 countries across 135+ currencies.

• Unify payments in person and online: Build a unified commerce experience across online and in-person channels to personalize interactions, reward loyalty, and grow revenue.

• Improve payment performance: Increase revenue with a range of customizable, easy-to-configure payment tools, including no-code fraud protection and advanced capabilities to improve authorization rates.

• Move faster with a flexible, reliable platform for growth: Build on a platform designed to scale with you, with 99.999% historical uptime and industry-leading reliability.

Learn more about how Stripe Payments can power your online and in-person payments, or get started today.