Last editedFeb 20212 min read
More than a decade ago, the crypto asset was with one example; bitcoin. After all those years, the definition has changed. To understand crypto assets, you will need to differentiate them from cryptocurrencies and digital assets.
Meaning of Crypto asset
From an accounting perspective, cryptocurrency and crypto assets have the same meaning. It can take two sides; the cryptographic currency or the cryptographic asset. Whatever side you will pick, you need to know that those are not physical assets but digital ones. In crypto assets accounting, they are assets on the balance sheet.
What are Assets in Accounting?
Assets are on the opposite side of the liability on the balance sheet. They are resources owned by a business and can be tangible or intangible. The total assets need to be equal to the total liabilities and equity to have an accurate balance sheet. It is also essential to know that there are fixed assets and current assets. There are tangible assets that can be measured and are real such as inventory. Intangible assets, on the other hand, are digital, like stocks and bonds.
Crypto assets Overview
There are various crypto asset types in the market. They are commonly known as cryptocurrencies such as Litecoin, Ripple, Bitcoin, and Ethereum. With crypto assets, you will need to use cryptographic techniques to access digital assets. It will act as a medium of exchange for all financial transactions.
Other crypto asset classifications are utility coins, security coins, and cryptocurrencies. The currency is secured to create additional units and transfer assets. Most of these currencies are on blockchain technology.
With crypto assets, you will experience seismic shifts in the financial markets. There has been growing in popularity from advanced technology hence a disruption on the financial systems. The central banks and financial institutions have the power to change their influence. The challenge comes when it is not easy to categorize individual cryto assets and their effect on the ecosystem. The financial system has changed from the tokens, bitcoin, and altcoins trend.
More financial institutions have become interested in crypto assets transactions; the big problem is the fees and regulations. Crypto asset marketplaces need to consider fiat currencies to support their trading.
Characteristics of Crypto assets
A simpler way to understand a crypto asset is that they are digital assets; what is confusing is that not all digital assets are crypto assets. So, how do you distinguish the difference:
Crypto assets use cryptography
This kind of asset depends on distributed ledger technology.
You do not need a third such as a bank to issue crypto assets like what happens with bitcoins.
Crypto assets have three primary uses: as an investment, a means of exchange, and to access goods and services.
A typical example of a crypto asset is cryptocurrencies like Bitcoin. The belief is that a currency is an asset, but not all crypto assets are a cryptocurrency. The explanation is that assets come in three categories, known as tokens or tokenization of assets. The assets are held as investments for future profits, even though they can be unpredictable.
There has been a rise in bitcoin technology investment, and it is an excellent opportunity for investors to capitalize on and maximize their profits. In terms of crypto assets, bitcoin was the first, but with time it has diversified to other investments in the crypto asset market.
Every crypto asset business needs to follow the laid-down regulations and still stay relevant. Find out how GoCardless can help you with adhoc payments or recurring payments.