What is an encrypted asset? What are the common types of encryption assets? It is believed that all currencies in the currency circle have heard about the cryptocurrency exchange. However, the cryptocurrency exchange is an online platform where traders can convert one cryptocurrency into legal currency or another cryptocurrency. In other words, it is either like a bank or airport currency exchange, or like a stock exchange. Do you know what encryption assets are? Now let's get to know.

What is an encrypted asset?

Cryptographic assets are purely digital assets that use public ledgers on the Internet to prove ownership. They use distributed ledger technologies (DLT) such as cryptography, peer-to-peer networks and blockchains to create, verify and protect transactions. They can have different functions and characteristics: they can be used as exchange media; A way to store value; Or for other commercial purposes. Cryptographic assets are usually operated independently of central banks, central institutions or governments.

A distributed ledger is a database that stores shared and replicated electronic records in many locations and is maintained by members of the decentralized network. Each new transaction must be approved by all members of the network before being added to the ledger. Blockchain is a distributed ledger, which arranges data in the form of blocks and links them together. This unique data structure provides additional security for blockchain transactions because they are irreversible. Blockchain can be used to store various types of data, but it has recently become popular because it is used to store the history of cryptocurrency transactions.

What are the common types of encryption assets?

Cryptocurrency

Cryptocurrency (or virtual currency) is probably the most famous type of crypto asset. Cryptocurrency is a digital currency or medium of exchange. It can be used to exchange products or services, such as legal tender (such as Canadian dollars or U.S. dollars), for speculative purposes, such as trading on the Crypto Asset Trading Platform (CTP), and as a store of value.

It was created as a substitute for fiat currency, but cryptocurrency is not considered fiat currency in Canada. Cryptocurrency has no intrinsic value; Their perceived value is mainly based on the supply and demand relationship of the market. Examples include Bitcoin, Ethercoin, Ripple Coin, and Lite Coin.  

Cryptocurrencies are generally not considered securities and are therefore not subject to securities laws. For example, when you purchase cryptocurrency and immediately deliver the crypto asset to your digital wallet, this transaction is usually not subject to securities laws. However, if you trade cryptocurrencies on CTP and CTP keeps your cryptocurrencies in their digital wallet on their platform, this will create a continuous contract based on the value of the underlying crypto assets, and the contract is subject to securities regulation. CTPs providing users with this service must be registered with the appropriate securities regulatory authority. You can use the free country registration search tool provided by the Canadian Securities Authority to check whether the CTP is registered.

In some cases, cryptocurrencies may be considered securities. This may need to be determined on a case by case basis by examining the specific circumstances, scenarios or characteristics of cryptocurrencies. Due to the continuous development of technology and regulations in this field, if you are not sure whether the securities law is applicable to the cryptocurrency you are considering, please contact FCNB.

The use of cryptocurrencies to generate income, capital gains, or to pay for goods or services involves income taxes. You should consult the CRA's Cryptocurrency User and Tax Specialist Guide to ensure that you understand how to comply with your taxes.

Practical Token

Utility tokens use distributed ledgers or blockchain platforms to provide access to specific products or services (which may still be under development), or to purchase specific products or services. Providers of products or services usually issue tokens that can only be used within the publisher's network.

Securities token

Securities tokens are usually sold or auctioned in an ICO or ITO, allowing companies to raise funds to fund ideas or business models. The enterprise provides a security token in exchange for legal tender or other encrypted assets. Securities tokens are often accompanied by shares of the project and additional benefits, such as voting rights, profit sharing or dividends. However, a project may not succeed, and investors should remember that they use their funds to support the idea of a business model - not a fully realized product or service.

Irreplaceable token

Non replaceable tokens (NFT) are tokens that exist on distributed ledgers or blockchains, recording the ownership of unique tangible or intangible objects - such as songs, digital images, videos, designer clothes, etc. Irreplaceability means that these tokens cannot be exchanged with each other; Each is unique. NFT is relatively new, even for crypto assets, and NFT's regulatory program and market are developing rapidly.

In general, the above content introduces in detail what encryption assets are and what types of common encryption assets are. I believe you will understand it after reading it. In short, crypto assets are pure digital assets, which use public ledgers on the Internet to prove ownership. Common types of crypto assets include cryptocurrency, utility token, security token and irreplaceable token.