Digital Assets

Key Highlights

• Digital assets are electronic representations of value or ownership that are created, stored, and transacted using digital or blockchain-based technologies.

• Types of digital assets includes cryptocurrencies, security tokens, stablecoins and CBDCs.

What are Digital Assets?

Digital Assets are electronic representations of value or ownership that are created, stored, and transacted using digital or blockchain-based technologies. These assets include a wide range of instruments such as cryptocurrencies, tokenized securities, central bank digital currencies (CBDCs), and non-fungible tokens (NFTs). Unlike traditional financial assets, digital assets exist entirely in electronic form and rely on cryptographic security to verify transactions and ownership.

Types of Digital Assets

• Cryptocurrencies: Decentralized digital currencies like Bitcoin and Ethereum, used for transactions or as a store of value.

• Security Tokens: Tokenized forms of traditional assets such as equities, debt, or real estate, offering fractional ownership and easier transferability.

• Stablecoins: Digital currencies pegged to stable assets (e.g., USD or INR) to reduce volatility.

• CBDCs: Digital forms of sovereign currency issued and regulated by central banks.

Benefits of Digital Assets

• Increased Efficiency: Streamlined transactions and reduced settlement time.

• Transparency: Immutable transaction records via distributed ledger technology.

• Accessibility: Broader investor participation through fractional ownership.

• Innovation: New structures for asset issuance, trading, and custody.

Risks and Considerations

• Regulatory Uncertainty: Evolving legal frameworks and compliance challenges.

• Market Volatility: Price instability, especially in unregulated tokens.

• Custody & Security Risks: Vulnerability to cyberattacks or digital theft.

• Liquidity Constraints: Limited secondary markets for some tokenized assets.