By Lori Jo Underhill
The definition of fungible by Merriam-Webster is: "being something (such as money or a commodity) of such a nature that one part or quantity may be replaced by another equal part or quantity in paying a debt or settling an account. Oil, wheat, and lumber are fungible commodities, fungible goods, and capable of mutual substitution."
According to the SEC in a statement of rules about derivatives, "Fungible instruments (that) are standardized as to their material economic terms."
There is a line of United States case law where courts have ruled that stock equities are fungible based on their characteristics and material economic terms. These definitions were determined in a time when settlements by DTC (Depository Trust Corporation) held custodial equities in bulk, and stock equity trades are executed in a single market during specific trading hours where equities of similar character have the same material economic value.
However, not all Digital Equities share the same characteristics and economic value.
Digital Equity
Definition: A “Digital Equity” is a representation of an ownership interest; whole or fractional, tangible or intangible. A market may or may not exist in consensus for the value of the underlying property. A Digital Equity is difficult or impossible to divide. A Digital Equity is non-fungible. A non-fungible asset is unique in its characteristic as a representation of an asset or item, or the manifestation of one unique and serialized intangible or tangible asset or item. Digital Equities are unique to one another, distinct in character, and not interchangeable.
Examples, Unique Shares of an Entity, Ownership in Real Property, Cryptokitties, Bonds, Shares in Financial Products, Unique Artwork, Jewelry, or Couture Fashion. Any asset that is indivisible, serialized, or unique.
DIGITAL EQUITIES ARE DISTINCT FROM INCUMBENT STOCK EQUITY INSTRUMENTS
There are three reasons why Digital Equities are distinct from Incumbent Equities.
1. The Digital Equity may not be held in custody by a third party and held by the owner.
2. Serialization, Identity, and Authentication rights are an integral, inherent, and fundamental part of the asset.