Digital Assets

Digital Assets as Investment Vehicles Why this matters on the exam: Digital assets are a growing topic in the Series 65 curriculum under Section II (Investment Vehicle Characteristics), and NASAA has increasingly tested candidates' ability to classify, characterize, and understand the risks of these instruments — particularly as regulators work to apply existing securities frameworks to a new asset class. --- ## What Are Digital Assets? Digital assets are a broad category of electronically recorded assets that exist on a distributed ledger or blockchain. For Series 65 purposes, the most testable concepts relate to how these assets are *classified* and what *characteristics* distinguish them from traditional securities. ### Key Categories | Type | Description | Securities Status | |---|---|---| | Cryptocurrency | Digital currency (e.g., Bitcoin) used as a medium of exchange or store of value | Generally *not* considered a security | | Utility Token | Grants access to a product or service on a blockchain platform | Often *not* a security, but context-dependent | | Security Token | Represents ownership interest; passes the Howey Test | IS a security; subject to securities law | | Stablecoin | Pegged to a fiat currency or commodity to reduce volatility | Classification varies; regulatory scrutiny increasing | | NFT (Non-Fungible Token) | Unique digital asset representing ownership of a specific item | Typically *not* a security, but some may qualify | --- ## The Howey Test and Digital Assets The most critical analytical tool for classifying digital assets is the Howey Test, derived from a 1946 Supreme Court case. Under this test, an instrument is an investment contract (and therefore a security) if it involves: 1. An investment of money…