Beyond Bitcoin: A Compendium of Cryptocurrency

SUMMARY This primer explains cryptocurrency types: payment coins (Bitcoin), programmable platforms (Ethereum), stablecoins, privacy coins, governance tokens, utility tokens, DeFi protocols, meme coins and CBDCs. It covers their technical functions and regulatory status. The document highlights the 2025 shift from SEC Chair Gensler’s enforcement-heavy approach to Chair Atkins’ framework-focused regulation, emphasizing that legal classification depends on substance over labels.

Understanding cryptocurrency requires cutting through both technological jargon and legal complexity. At its core, cryptocurrency represents digital money secured by advanced mathematics, making it nearly impossible to counterfeit. But within this broad category exist distinct types with vastly different legal and regulatory profiles.

Payment Cryptocurrencies: Digital Cash

Bitcoin remains the original cryptocurrency, launched in 2009 as peer-to-peer electronic cash. Its creator envisioned a system where people could send payments directly to one another without banks or credit card companies in the middle. Bitcoin operates on a decentralized network where transactions are verified by participants worldwide and recorded in a public ledger that anyone can view but no single entity controls.

Think of Bitcoin’s blockchain as a permanent record book. When you send Bitcoin to someone, network participants called miners compete to validate your transaction. Winners bundle transactions into a “block” that gets added to the chain and receive newly created Bitcoin as rewards. This process makes the system secure because altering past transactions would require redoing all the computational work that came after them.

Similar payment-focused cryptocurrencies include Litecoin (created for faster transactions), Bitcoin Cash (designed for higher transaction capacity) and Dash (offering optional privacy features). These share Bitcoin’s philosophy of enabling direct payments but make different tradeoffs regarding speed and cost.

From a legal perspective, payment cryptocurrencies have gained the most regulatory clarity. The Commodity Futures Trading Commission treats Bitcoin as a commodity, similar to gold. The IRS classifies it as property for tax purposes, meaning you owe capital gains taxes when you sell. Most states require businesses dealing in Bitcoin to obtain money transmitter licenses.

Platform Cryptocurrencies: Programmable Money

Ethereum revolutionized blockchain technology in 2015 by creating a programmable platform that goes far beyond simple payments. While Bitcoin’s network tracks who owns how many coins, Ethereum’s network can execute complex programs called smart contracts, which are self-executing agreements that automatically enforce themselves when predetermined conditions are met.

Think of a smart contract like a vending machine. You insert money and select a product, and the machine automatically dispenses your item without requiring a human. Similarly, an Ethereum smart contract might automatically transfer ownership of a digital asset when payment is received or automatically distribute royalties when a sale occurs.

This programmability enables applications including financial services where people lend and borrow without traditional banks, marketplaces for digital collectibles, prediction markets where people bet on future events and organizations that coordinate decision-making through code.

Ether (ETH) serves as Ethereum’s native currency. Beyond functioning as money, it pays for computational resources needed to run programs on the network. Every operation requires a small amount of ETH as a fee to compensate network participants.

Other major platforms include Cardano (emphasizing peer-reviewed academic research), Solana (prioritizing extremely high transaction speeds), Polkadot (enabling different blockchains to communicate) and Avalanche (using novel consensus mechanisms for speed and security).

The legal status of platform cryptocurrencies has been heavily contested. Under former SEC Chair Gary Gensler (who led the agency from April 2021 until January 2025), the SEC took an aggressive enforcement approach, filing more than 100 cryptocurrency-related actions. However, the regulatory landscape shifted dramatically in 2025 when Paul Atkins became the new SEC Chair in April. The SEC established a Crypto Task Force to develop clear regulatory frameworks rather than relying primarily on enforcement.

Stablecoins: Seeking Price Stability

Stablecoins attempt to solve cryptocurrency’s biggest practical problem, extreme price volatility. Bitcoin’s value can swing 10% or more in a single day, making it impractical for everyday transactions. Stablecoins aim to maintain a stable value, typically by pegging themselves one-to-one with the US dollar.

Fiat-backed stablecoins like Tether (USDT) and USD Coin (USDC) claim to hold reserves of actual US dollars or dollar-equivalent assets backing each token. In theory, you could always redeem one USDC token for one actual dollar from the issuer’s reserves.

Crypto-collateralized stablecoins like DAI lock up other cryptocurrencies as collateral. If you want to create $100 worth of DAI, you might need to deposit $150 worth of Ethereum as collateral. If Ethereum’s price drops too much, your collateral gets automatically sold to protect the system.

Algorithmic stablecoins attempted to maintain their peg through automated supply adjustments without traditional backing. However, this approach suffered a spectacular failure in May 2022 when TerraUSD collapsed, wiping out roughly $40 billion in value and leading to fraud charges against its founder.

Stablecoins serve as crucial infrastructure for cryptocurrency markets. They allow traders to move value between different cryptocurrencies without slow bank transfers. They offer people in countries with unstable currencies a way to access dollar-denominated value using just a smartphone.

From a legal perspective, stablecoins attract intense regulatory scrutiny because they bridge traditional finance and crypto. Banking regulators worry that stablecoin issuers essentially operate as unregulated banks. Congress has held numerous hearings on stablecoin legislation requiring issuers to hold high-quality reserves and submit to regular audits.

Privacy Coins: Financial Anonymity

Bitcoin is often misunderstood as anonymous, but it’s actually pseudonymous. All transactions are permanently recorded on a public blockchain. If someone learns that a particular address belongs to you, they can trace your entire transaction history.

Privacy coins like Monero and Zcash were specifically designed to provide much stronger anonymity. Monero mixes your transaction with others so observers can’t tell which person in a group sent the payment. It generates unique addresses for each transaction and hides transaction amounts. Zcash offers optional privacy through advanced cryptographic techniques that allow you to prove you have the right to spend coins without revealing which coins, how much or who receives them.

Privacy coin advocates argue these tools serve legitimate purposes including personal safety, commercial confidentiality and political protection for dissidents. The same privacy that enables money laundering also protects domestic violence survivors from financial tracking.

However, privacy coins represent the most controversial category. Law enforcement agencies worldwide have raised concerns about their use in money laundering, sanctions evasion and ransomware payments. South Korea banned trading of privacy coins in 2021. Japan effectively banned them by requiring exchanges to delist coins that obscure transaction details. In the United States, major cryptocurrency exchanges including Coinbase refuse to list them to avoid regulatory complications.

Governance Tokens: Decentralized Decision-Making

Governance tokens represent voting rights in decentralized protocols. Rather than having a company’s board make decisions about product changes or fee structures, token holders vote on proposals. Uniswap’s UNI token allows holders to vote on proposals to modify the exchange protocol. MakerDAO’s MKR token governs the protocols that maintain DAI. Compound’s COMP token lets holders vote on which assets the protocol supports and what interest rates it uses.

The governance token model attempts to distribute decision-making power among users rather than concentrating it with a centralized team. However, these tokens face legal questions about whether they constitute securities. If a token’s value depends primarily on a founding team’s efforts and buyers expect profits from those efforts, the token likely meets the definition of an investment security.

Utility Tokens: Access to Services

Utility tokens grant holders access to specific products or services within blockchain ecosystems. Chainlink’s LINK token powers a network that connects smart contracts to real-world data like stock prices or weather information. Users pay LINK tokens for these data services. Filecoin operates a decentralized storage network where people pay FIL tokens to store files. Basic Attention Token (BAT) facilitates transactions within the Brave browser’s advertising ecosystem.

These tokens theoretically derive value from demand for the underlying service rather than speculation. However, the legal distinction remains contested. The previous SEC administration’s position was that calling something a utility token doesn’t automatically make it one if it was sold to raise capital with buyers expecting price appreciation.

DeFi Tokens: Programmable Financial Services

Decentralized Finance (DeFi) protocols use smart contracts to recreate traditional financial services without centralized intermediaries. Aave allows users to lend cryptocurrencies and earn interest or borrow against collateral. Curve Finance specializes in trading between similar assets like different stablecoins. Yearn Finance automates yield farming strategies, moving users’ funds between protocols to maximize returns.

DeFi protocols typically issue tokens serving multiple purposes: governance rights, utility access, fee-sharing mechanisms and incentive rewards. This multifaceted nature makes legal classification extraordinarily difficult. The previous SEC administration indicated many DeFi tokens likely constituted securities, but DeFi’s decentralized structure creates unique enforcement challenges since many protocols operate through globally distributed networks with no identifiable founder.

Meme Coins: Community and Speculation

Meme coins typically start as jokes or internet memes yet can achieve multibillion-dollar market capitalizations. Dogecoin began in 2013 as a lighthearted Bitcoin parody featuring the Shiba Inu dog from the “Doge” meme. Despite no serious technological innovation, it developed a devoted community and reached a market cap exceeding $80 billion at its peak, driven partly by Elon Musk’s endorsements.

Shiba Inu (SHIB) launched as a “Dogecoin killer” and attempted to add utility through a decentralized exchange and NFT projects. Many meme coins exist purely as speculative vehicles, offering no pretense of utility. From a legal perspective, many would likely qualify as securities, though the SEC typically focuses enforcement on cases involving substantial harm or clear fraud.

Wrapped Tokens: Bringing Assets Across Blockchains

Wrapped tokens represent assets from one blockchain that can be used on another blockchain. Wrapped Bitcoin (WBTC) represents Bitcoin on the Ethereum network, allowing Bitcoin holders to participate in Ethereum-based DeFi applications. A custodian holds the actual Bitcoin while issuing equivalent WBTC tokens on Ethereum. When someone wants to convert back, the WBTC gets burned and the custodian releases the Bitcoin.

This solves the problem that blockchains can’t naturally communicate with each other. Wrapped tokens enable cross-chain functionality, though they introduce trust requirements since custodians must actually hold the underlying assets.

Exchange Tokens: Platform-Specific Currencies

Major cryptocurrency exchanges issue their own tokens that provide benefits to users of their platforms. Binance Coin (BNB) offers reduced trading fees on the Binance exchange and can be used to pay for various services within Binance’s ecosystem. FTX Token (FTT) provided similar benefits on the FTX exchange before that platform’s spectacular collapse in 2022, demonstrating the risks when exchange tokens are tied to centralized platform success.

These tokens create network effects where holding the token makes using the exchange more attractive, while exchange success drives token demand. However, their value depends heavily on the centralized exchange’s performance and management, raising securities law questions.

Fan Tokens: Sports and Entertainment Engagement

Fan tokens allow supporters to engage with sports teams, musicians and other entertainment entities. Chiliz powers a platform where teams like FC Barcelona and Paris Saint-Germain issue tokens that grant voting rights on minor team decisions, access to exclusive experiences and rewards. These tokens attempt to create new revenue streams and engagement mechanisms for entertainment properties while giving fans a sense of ownership and participation.

Legally, fan tokens occupy uncertain territory since they’re often marketed as collectibles or engagement tools rather than investments, though their trading on exchanges and price speculation complicate this characterization.

Central Bank Digital Currencies: Government-Issued Crypto

Central Bank Digital Currencies (CBDCs) represent government-issued digital currencies. China’s digital yuan is the most advanced among major economies, already deployed in pilot programs. The Bahamas launched the Sand Dollar in 2020. Nigeria and Jamaica have also launched CBDCs.

CBDCs offer governments advantages including more efficient payment systems, improved financial inclusion and enhanced monetary policy tools. However, they raise significant concerns about government surveillance, programmable money with spending restrictions and potential disruption to the banking system. From a legal perspective, CBDCs fit clearly within existing frameworks since governments issue them.

Understanding the Regulatory Shift

The regulatory environment underwent dramatic change in 2025. In February, the SEC dismissed its high-profile case against Coinbase, citing the Crypto Task Force’s work developing comprehensive frameworks. This marked a clear departure from the enforcement-heavy approach of the previous administration.

For anyone navigating cryptocurrency, the essential insight is that legal classification depends on substance rather than labels. Calling something a utility token doesn’t make it one if it functions like a security. The current SEC administration has signaled its intention to provide clearer regulatory pathways, moving away from “regulation by enforcement” toward developing frameworks through public engagement. However, this doesn’t mean projects get a free pass. Commissioner Peirce has emphasized that while the SEC aims to enable innovation, it will still pursue fraud and securities law violations.