Digital and virtual assets

Abstract

This chapter first introduces the concepts of currency, money, fiat money, and legal tender before positioning the various types of digital and virtual assets. As there is no universally accepted framework for classification of digital assets, this chapter will provide the reader with a simple-to-understand categorisation for virtual currencies and cryptocurrencies and position e-money and central bank digital currencies (CBDCs) in the mix (the latter being covered in Chapter 7 ). A classification framework will also be given for the various types of crypto-assets, covering cryptocurrencies, stablecoins (collateralised and non-collateralised), utility tokens (including exchange and governance tokens), security tokens (equity, asset backed, and debt collateralised), and non-fungible tokens (NFTs). It will detail the characteristics of all digital assets and offer comparisons with centralised payment ecosystems on aspects including use cases (current and potential), settlement, safety, privacy, risks, and many more.