What Is a Token Generation Event?

To understand what a Token Generation Event is, one needs to understand the basics of tokens and tokenization. 

A token is a digital unit designed with utility in mind, providing access and use of a larger crypto economic system. It does not have a store of value on its own but is made so that software can be developed around it. Tokens are usually created through an initial coin offering. 

ICOs are a type of crowdfunding that use cryptocurrencies as a means of raising capital for early-stage companies. But not all companies looking to raise capital from tokens necessarily go down the ICO route. Some firms can opt for a Token Generation Event instead. Both ICOs and Token Generation Events serve a similar purpose, but fear of regulatory consequences results in some companies preferring to brand their fundraising campaigns as Token Generation Events. 

Most Token Generation Events involve companies raising tokens in the utility industry. As these types of tokens normally constitute a small proportion of the product, companies prefer to call their token sales Token Generation Events. 

Regulatory bodies have come under increased pressure to treat ICOs as security offerings and therefore income generated from them is taxable. In contrast, Token Generation Events are not treated as securities, and are not taxable. Hence, issuers of tokens may see tax advantages in calling their events Token Generation Events as opposed to initial coin offerings.