Over the recent years, cryptocurrencies like Bitcoin and blockchains like Ethereum have transformed the manner in which many people, businesses, and governments transact and share information. As Kavan Choksi / カヴァン・ チョクシ points out, such digital assets have now emerged as a major asset class, which investors look to for potential returns and diversification. The digital asset ecosystem even includes companies that mine cryptocurrencies, as well as businesses that benefit from the many uses of blockchain. Multiple aspects of the digital asset ecosystem present an opportunity for investors.
Kavan Choksi / カヴァン・ チョクシ talks about the important digital asset categories
Digital assets have significantly captured investor interest over the last decade, and has grown at an astounding pace in recent years. Owing the recent advancements in disruptive technologies like artificial intelligence (AI), the digital asset industry has been consistently propelling financial innovation forward.
While the term “digital asset” is universally recognized, it still can be ambiguous and contextual. Owing digital assets may have a variety of implications, depending on the purpose and type of the asset. This is because digital assets are extremely diverse. They may serve as a proof of ownership, stores of value or mediums of exchange. Digital assets may provide anonymity, grant voting rights, or generate yield. As opposed to traditional financial instruments, digital assets are purely virtual. They tend to be supported by a decentralized ledger known as a blockchain.
Blockchain technology is widely considered to be among the most disruptive technologies of all time. Its capabilities, like transparency, programmability, immutability, and decentralization facilitate a variety of applications across public and private sectors, including insurance, healthcare, finance, and more. Even though there still are no standardized parameters for defining digital assets, they are commonly grouped into the following categories:
- Cryptocurrencies: Cryptocurrencies like bitcoin (BTC) and ether (ETH) are among the most prominent digital assets. Such cryptocurrencies can be sold, purchased or held as a store of value.
- Tokenized money: Tokenized money is considered to be the digital equivalent of traditional fiat currency like Central Bank Digital Currencies (CBDCs) and stablecoins. Such assets are intended to stabilize the ecosystem.
- Tokenized assets: Tokenized assets digitalize real-world assets like bonds, stocks, real estate, commodities and money market funds. They also provide proof of ownership for discerning virtual items and intellectual property.
- Indirect funds: Indirect funds ideally provide diversified or managed exposure to digital assets, like cryptocurrencies, or to the digital asset ecosystem. Such funds may directly purchase crypto or hold cryptocurrency futures and ETFs, shares of firms with significant crypto assets, or stocks of blockchain-related companies.
As per Kavan Choksi / カヴァン・ チョクシ, even though digital assets are relatively new, they have experienced explosive growth in a short span of time. Over the years, they have managed to overcome several regulatory hurdles, which paved way for broader use and portfolio integration. Digital assets especially help enhance portfolio diversification and resilience.
