An Introduction To Crypto Assets

by | Aug 23, 2021 | Financial Services

In recent times, there have been more stories about cryptocurrency. You may have seen people refer to cryptocurrency assets, sometimes shortened to crypto assets.

The Definition

Crypto assets are defined as a digital currency. This means that it has no physical form but is instead traded via a form of sophisticated encryption known as cryptography. One method of trading this is via blockchains, where a virtual ledger is established and a group of users agree to record transactions. Once recorded, the transactions are then “locked” for confirmation.

Where it becomes complicated is in the definition of what this form of intangible currency (often referred to as “tokens”) represents. Essentially you cannot call a crypto asset a tangible asset, yet in the United States, the IRS offers guidance saying that you should declare your crypto assets for federal income tax purposes.

The Number of Cryptocurrency Options

There are a number of assets you have probably already heard of, including Bitcoin. However, there are also thousands available throughout the world. While countries like the United States and groups such as the European Union have recognized cryptocurrency and included it as part of their regulations, some countries such as China and Russia have banned cryptocurrency and cryptocurrency-related activity.

As with any form of investment, it is important to be aware that crypto assets can go up and down in value and to monitor your investment. This is why you should discuss any investment with a financial advisor before considering whether or not to purchase any cryptocurrency.

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