What are the differences between cryptocurrencies and crypto assets? The terms cryptocurrencies and crypto assets are often used interchangeably in most of the cases by the users.
A few crypto experts say that as of now it is hard to discern between the two but as and when blockchain becomes more mature it will be possible.
However, others point out that though these two terms are used interchangeably at times, there are significant differences between the two. This article puts forth those differences for your knowledge.
There are several users who still have a lot of confusion while differentiating cryptocurrencies and crypto assets. Check out Differences Between Crypto Market Maker and Taker.
For them to understand, the best and simplest way to differentiate crypto assets and cryptocurrencies is to say that all crypto assets are cryptocurrencies but the converse is not true.
Typically, the term crypto asset has a much broader meaning than cryptocurrencies. Initially, it was just Bitcoin that was the only example of a crypto asset.
Now, after a decade, the meaning as well as the definition of it has changed significantly. Now it includes a lot of more different things under its broad umbrella.
4 Differences Between Cryptocurrencies and Crypto Assets
Therefore, if you really want to understand crypto assets better, you will first need to differentiate this term from other relevant terms such as digital assets and cryptocurrencies.
Typically, the term cryptocurrencies refer to the virtual currencies that come with cryptographic functions. These coins help in making payments for buying a product or service apart from making fund transfers.
The cryptocurrencies are typically decentralized. This means that the supply and transaction of these coins are not overseen by any central authority or governing body.
These digital currencies leverage and operate on blockchain technology which is in accordance with its decentralized nature. There are thousands of different types of cryptocurrencies available on the market right now, each having a different market cap, value and growth potential.
On the other hand, the term crypto assets are used to refer to the tokens that signify an actual asset such as real estate, artwork, hardware ownership and more.
Usually, the crypto assets are stored or recorded on distributed ledgers. This includes all non-currency assets such as utility tokens and security tokens as well as all types of cryptocurrencies. Also, it can be said that crypto asset networks such as Ethereum generate tokens called utility tokens.
These tokens have a specific use and purpose to serve. Some of these utility tokens that are also referred to as crypto assets are LINK, KNC, CRO, ZRX, and more.
Then there are the transactional tokens such as IOTA and XRP that also fall under the crypto assets category. These tokens serve a specific purpose to facilitate interbank transactions, cross-border payments, and more.
Normally, a cryptocurrency is a store of value. The blockchain technology helps in transferring the value but cryptocurrencies as such do not have any extra functionality whatsoever. It is just that cryptocurrency is thought to be as money that people save in order to use it to buy products and services.
On the other hand, crypto assets have it all. These serve as a medium of exchange, a store of value, and at the same time crypto assets also come with an additional functionality layer.
It is the network or the technology behind the crypto assets that make it perform its functions and in addition to that allows it to build smart contracts.
One of the most well known crypto asset networks is the Ethereum network while others are NEO and EOS. All have their native coins that are used as different currencies.
3. Regulatory Focus
The governments focus on different aspects in terms of regulations imposed on crypto assets and cryptocurrencies, a few are common and a few are unique. As for the cryptocurrencies, within the United States the primary focus is on the administrative level as well as on the agency level.
There are different governing bodies that oversee matters which include the Securities and Exchange Commission or SEC, Federal Trade Commission or FTC, Commodity Futures Trading Commission or CFTC, Internal Revenue Service or IRS, Federal Reserve, Office of the Comptroller of the Currency or OCC, and Financial Crimes Enforcement Network or FinCEN.
On the other hand, when it comes to crypto assets, it being a broader term the focus of the regulatory bodies is on a wider variety of issues. Their specific focus is on the payment systems, consumer and investor protection, market integrity, bank exposures, AML, ICO issuance, secondary trading of tokens, financial crime, and stability monitoring. These approaches however may vary depending on the jurisdictions.
4. Risks Associated
As for the crypto assets the inherent risks of it include those that are related to the consumers. It also has the risk of market manipulation as well as financial crimes related to money laundering.
In comparison, the risks associated with cryptocurrencies include risks while trading which is mainly related to the extremely volatile nature of the market and the crypto coins. These are highly speculative products and are subject to unpredicted changes in price as well as market sentiment.
The coins and the exchanges are usually unregulated as of now by both the central banks and governments. These are also susceptible to hacking and error, and can also be discontinued or its forks can be created.
There are also risks related to CFDs and spread bets such as gapping or slippage, higher charges with respect to other asset classes and pricing variations.
Which Has a Better Future – Cryptocurrencies or Crypto Assets?
If you look at things from the accounting perspective, both crypto assets and cryptocurrencies have the same meaning, literally, and are both cryptographic.
However, there are two specific sides to it and either way both these are not physical assets but are digital, though a few crypto assets can have a physical form.
The benefits look much similar when you consider cryptocurrencies and crypto assets as well.
These are, the cost of transactions is low, the records are immutable, and it allows access to credit and ICO funding.
It also expedites transaction settlements and ensures global reach and scale while maintaining privacy when a transaction is made.
The types of crypto assets available in the market are varied and many. Some of the common cryptocurrencies are Litecoin, Bitcoin, Ripple, and Ethereum.
Most of these currencies are secured and work on blockchain technology that allows creating extra units as well as transferring the assets.
However, when it comes to the crypto assets, if you want to access the digital assets then you will have to use cryptographic techniques.
This will help in making all financial transactions acting as a medium of exchange.
In the financial market, the crypto assets have brought in a paradigm shift and the market experts say that it is all due to the advanced technology that has caused such disruptions in the financial systems.
The experts also believe that the power and influence of these crypto assets to change the system can be controlled by the financial institutions and the central banks.
However, the challenge lies in categorizing the individual crypto assets according to their effects on the financial ecosystem which has changed notably from the customary trends of tokens, Bitcoin, and Altcoins.
Today, the financial institutions are more fascinated with crypto assets transactions but the problem is in regulation and fees.
Therefore, the crypto asset marketplaces have to think about fiat currencies in order to support their trading.
Today, the crypto assets are evolving and with the changes made to impose stronger regulation, it can have a notable effect on the demand for them.
The evolution of the crypto assets is not a matter of chances.
In fact, it is the result of the developments made in this field based on the analysis of the users as well as the economy in which the cryptocurrencies operate.
As of now, the crypto assets do not come with strict regulation and whatever there is has not been applied effectively to date.
Therefore, quite naturally, you, just like other people, may wonder whether or not this crypto economy will survive when extensive regulations are imposed in the future and notable changes are made in the market structure.
However, cryptocurrencies, on the other hand, are unique and it is this uniqueness that has increased its demand from people from all walks of life.
Its user base includes techno artists and libertarians, technical users and economic pessimists, investors and speculators, traders and common individuals.
Therefore, there is no doubt that crypto assets and cryptocurrencies, in particular, are here to stay indeed.
The ball is now in the governments’ court that needs to find out how best these can be regulated and their connections with the traditional financial system of the world can be overseen.
The governments need to change their viewpoint while formulating the policies and the potential regulatory options so that it protects the shareholders in the best possible way.
Till now, the governments who have been liberal enough to open the doors to crypto assets and cryptocurrencies as a mode of payment have done quite a good job.
They have incorporated important and useful regulatory aspects such as:
- Anti-Money Laundering or AML regulation
- Know Your Customer or KYC regulation
- Combating the Financing of Terrorism regulation
- Investor and consumer protection
- Stability of financial system as well as individual financial institutions and
The regulations of cryptocurrencies also have been quite noteworthy and further talks are on to find out how best these laws and guidelines can be established.
This will secure the future of cryptocurrencies and at the same time make it more appealing to and safer for the investors but not for the cybercriminals.
For example, China has gone to the extreme and banned cryptocurrencies and is still cracking down on crypto mining firms by imposing stricter regulations.
On the other side, the US senators have thought of imposing new regulations on crypto tax reporting measures to control its use.
However, for both crypto assets and cryptocurrencies, users expect to have clear and feasible regulations.
The most important hurdle, they point out, is that the jurisdiction of the agencies to oversee things differs from one state to the other.
However, both crypto assets and cryptocurrencies, as said earlier, will continue to grow in popularity till it dominates the financial system on the whole.
It is due to this potential that the Federal Reserve, US Treasury, Security and Exchange Commission, Commodity Futures Trading Commission, as well as the Internal Revenue Service, all have shown their interests in regulation and policing the crypto industry.
Undoubtedly, 2020 was a great year for both cryptocurrencies and crypto assets, and 2021 is equally promising. Now the question is what is next?
It is evident that, with the prices of crypto assets and currencies reaching an all- time high and the regulatory measures supposed to create a huge impact on the crypto industry, there will be more and more major companies expressing their interest in institutional buy-ins.
Add to that, the interest of the individuals, such as investors like Elon Musk, has skyrocketed as well this year.
All these points at the direction where this industry is headed in the future: northwards.
The serious considerations of the financial and legal consequences of crypto assets and currencies indicate that these are here to stay for sure. Hopefully, this article has helped you to understand their differences and significance as well.