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Cryptographic assets (crypto assets) are transferable digital representations that are designed in a way that prohibits their copying or duplication. The technology that facilitates the transfer of crypto assets is referred to as blockchain or distributed ledger technology. Blockchain is a digital, decentralized ledger that keeps a record of all transactions that take place across a peer-to-peer network and enables the encryption of information.
Crypto assets come in a variety of forms, and new crypto assets (sometimes referred to as digital tokens or digital assets) continue to be created. These assets may function as a medium of exchange, provide a right to use a product or service, provide rights to an underlying asset, provide voting rights, or provide rights to profits and losses among others.
1.1.1 Crypto asset terminology
The following figure summarizes some of the common terms used when discussing crypto assets.
Figure CA 1-1
Frequently used terminology
Asset-backed token
A crypto asset that derives its value from something that does not exist on the blockchain but instead is a representation of ownership of a physical asset (e.g., natural resources, such as gold or oil)
Other terms used to describe crypto assets. The terms can be used interchangeably because there is no universally-accepted definition of either.
Crypto assets that operate independent from a central bank that are intended to function as a medium of exchange or store of value
Initial Coin Offering (ICOs)
A capital raising activity in which the issuer receives consideration in exchange for issuing coins to investors. ICOs might be subject to local securities law, and significant regulatory considerations may apply
Security token
Crypto assets that provide an economic stake in a legal entity. Sometimes it is a right to receive cash or another financial asset, which might be discretionary or mandatory. Sometimes it conveys the ability to vote in company decisions and/or represents a residual interest in the issuer entity.
Crypto assets that peg their value to a traditional asset, such as fiat money. They are often backed by collateral.
Utility token
Crypto assets that provide users with access to a product or service.

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