Functional Hybridity and Classification Conflicts: How Should Multi-Purpose Tokens Be Categorised Under MiCA?
MiCA promises a clean taxonomy of crypto-assets, but programmable tokens increasingly bundle governance, utility and investment features in a single instrument — testing how far the regime can stretch before its categories start to fracture.
Multi-purpose tokens sit at the crossroads of user access, protocol governance and speculative value. Their functional hybridity clashes with MiCA’s assumption that tokens can be neatly boxed into ARTs, EMTs, utility or residual categories, exposing the regime to classification conflicts and divergent national interpretations.
Introduction
The Markets in Crypto-Assets Regulation (MiCA) aims to create a coherent legal taxonomy for crypto-assets within the European Union. Yet the regulation enters into force at a time when the crypto-asset ecosystem is characterised not by categorical clarity, but by profound hybridity. Many tokens today are not designed with a single economic purpose. Instead, they integrate multiple functions—governance rights, access rights, utility features, revenue-sharing mechanisms, and speculative potential—within the same technological container. This coexistence of heterogeneous functions within a single token poses an acute conceptual challenge to MiCA’s classificatory system, which is premised on the assumption that tokens can be clearly sorted into distinct legal categories such as asset-referenced tokens (ARTs), e-money tokens (EMTs), utility tokens, or crypto-assets of residual type.
This article argues that MiCA’s classificatory architecture is inherently strained by the emergence of multi-purpose tokens whose economic behaviour does not conform to the discrete categories established in the regulation. These tokens occupy liminal spaces at the intersection of user utility, governance participation and investment expectation. Their hybrid nature calls into question the stability of MiCA’s categories and raises the risk of inconsistent classification across Member States, interpretive fragmentation among supervisory authorities, and legal uncertainty for issuers and service providers.
The following analysis examines the sources of functional hybridity in token design, explores the doctrinal conflict between form and substance in classification, and evaluates the practical and theoretical implications of multi-purpose tokens for MiCA’s regulatory coherence.
I. The Emergence of Functional Hybridity in Token Design
The concept of a token as a single-purpose digital object has largely dissolved as blockchain architectures have matured. The programmability of tokens enables them to combine several layers of economic and governance functions. A token created to access a platform may also confer participation in governance decisions, entitle holders to a share of protocol revenues, or act as collateral within decentralised finance (DeFi) protocols. Moreover, the secondary market behaviour of users may transform a token’s economic profile independently of its original design: a token intended for utility can become a speculative instrument if widely traded; a governance token can acquire financial characteristics if its voting power influences economic outcomes.
Functional hybridity therefore arises from both design and practice. On the one hand, issuers intentionally create multi-purpose tokens to attract users, align incentives and generate network effects. On the other hand, market participants reinterpret tokens through usage patterns that diverge from the issuer’s intentions. The result is a class of assets whose economic substance is dynamic and multifaceted, resistant to static regulatory definitions.
MiCA was drafted against a background in which tokens were still perceived as occupying reasonably stable categories. The hybridisation of tokens undermines this assumption by introducing a fluidity that escapes rigid classification. This raises the question of how a token should be qualified when it performs several functions simultaneously, and whether a single dominant function should prevail over others for regulatory purposes.
II. The Doctrinal Tension Between Form and Substance in Token Classification
MiCA adopts a classificatory logic built on definitional boundaries. Tokens are categorised by their presumed economic purpose: utility tokens provide access to goods or services; ARTs reference baskets of assets; EMTs reference a single official currency; and crypto-assets of generic type fall into the residual category. This structure presupposes that tokens can be meaningfully distinguished based on their primary function.
Functional hybridity disrupts this logic by challenging the premise that tokens have a single, identifiable purpose. A token may simultaneously act as a governance instrument, a speculative asset and an access key within a digital ecosystem. In such cases, determining the “true” nature of the token becomes a matter of interpretive judgment rather than objective analysis. Supervisory authorities must decide whether to prioritise the rights embedded in the token, the issuer’s stated purpose in the whitepaper, the token’s market behaviour, or the expectations of holders.
This tension mirrors classical debates in securities law between form-based and substance-based classification. Whereas form-based approaches rely on issuer intent and structural features, substance-based approaches focus on economic reality and market perception. MiCA oscillates between these two poles without fully articulating a hierarchy. It requires issuers to define the purpose of their tokens, yet empowers supervisors to override issuer characterisations if market behaviour indicates a different economic reality. The doctrinal risk is that classification becomes context-dependent and mutable, undermining legal certainty.
III. Multi-Purpose Tokens as Doctrinal Outliers: Why MiCA Struggles to Accommodate Hybrid Assets
Hybrid tokens expose gaps in MiCA’s taxonomy by simultaneously satisfying and contradicting multiple classificatory criteria. A token providing access to a platform may be a utility token, yet if it generates revenue for holders or is widely traded, it begins to resemble an investment instrument, potentially triggering scrutiny under MiFID rather than MiCA. Conversely, a governance token may function economically like equity, yet lack the formal characteristics of a security, leaving it ambiguously situated between MiFID and MiCA categories.
MiCA provides limited guidance for resolving such classification conflicts. The regulation distinguishes between categories but does not articulate a methodology for analysing tokens with overlapping functions. This creates a risk of inconsistent national interpretations, especially for tokens that evolve over time. A token may be classified as a utility token at issuance but reinterpreted as an ART or an investment-like instrument as its economic function changes.
Hybrid tokens also illustrate the difficulty of applying consumer protection and disclosure requirements. Issuers may prepare a whitepaper that focuses on one function while downplaying others, leaving investors insufficiently informed about the token’s full economic profile. Supervisory authorities may intervene ex post, but such interventions occur after market behaviours have crystallised.
IV. Toward a Functional and Dynamic Approach: Rethinking MiCA’s Classification Framework
The challenges posed by multi-purpose tokens suggest that a more dynamic, functional approach to classification may be necessary. Rather than adhering strictly to issuer intent or formal design, classification could prioritise economic effects, market usage patterns and the distribution of risks among participants. Such an approach would align more closely with the regulatory logic of MiFID, which classifies instruments based on economic substance rather than technological form.
However, adopting a purely functional approach would risk collapsing MiCA’s residual space into MiFID’s substantive categories, undermining the regulatory distinction between crypto-assets and financial instruments. A balance must therefore be struck. The EU may need to develop interpretive guidelines that integrate elements of both approaches: issuer intent should remain relevant, but market behaviour and token evolution must also be considered. This hybrid methodology would reflect the inherent multi-dimensionality of contemporary token design.
Supervisory coordination will be essential. Without consistent interpretive guidance from ESMA, Member States may diverge in their treatment of hybrid tokens. Such fragmentation would erode the harmonisation objective that underlies MiCA and create regulatory arbitrage opportunities. A coherent pan-European approach is therefore necessary to ensure that classification remains predictable even as token functionalities evolve.
Conclusion
Functional hybridity represents one of the most significant doctrinal challenges to MiCA’s classificatory system. Multi-purpose tokens defy simple categorisation because they integrate several economic functions and evolve through market behaviour. MiCA’s rigid categories struggle to accommodate this complexity, exposing the boundary between crypto-asset regulation and financial regulation to interpretive uncertainty and potential incoherence.
Resolving these tensions requires a classification framework that is sufficiently flexible to capture dynamic economic realities while remaining grounded in clear criteria. The EU must therefore refine its regulatory methodology to account for the programmability and evolving nature of tokenised assets. Hybrid tokens will continue to proliferate, and with them, the need for a more sophisticated, nuanced and adaptive regulatory logic.
Key takeaway. Multi-purpose tokens expose the limits of MiCA’s static categories: as governance, utility and investment functions converge in a single token, classification becomes a moving target that demands a more explicitly functional and dynamic regulatory approach.