What are Crypto Assets?

What are Crypto Assets?

Crypto Assets? What are they? That’s easy – you’re talking about a fancy new term for Bitcoin, aren’t you? A bit like when we stopped talking about KYC and started talking about CDD. It used to be a virtual currency and now it’s a “crypto asset”.

Well – yes and no!

In the same way that money laundering is a criminal activity that comes under the wider umbrella of financial crime, crypto asset is an overarching term that includes (but is not limited to):

  • Cryptocurrencies
  • Initial Coin Offerings (ICOs)

So you mean a ‘digital currency’ then?

Again – yes and no!

Many people get confused between what a digital currency is and what a cryptocurrency is. PayPal, Apple Pay and even loyalty points (e.g. frequent flyer points) on a platform can be considered as a digital currency. Bitcoin, Ripple, and Ethereum are also digital currencies but what makes them cryptocurrencies is the use of ‘cryptography[1]’ to encrypt publically recorded information held on a blockchain.

Still with me? Clear as mud?

So a cryptocurrency is a form of digital currency that uses encryption to keep transactions private?

Yes. Now we are getting somewhere.

So what is a crypto asset then?

A crypto asset is essentially any asset held digitally that uses encryption and blockchain technology. Consider the traditional Initial Placement Offering (IPO). A way for a company to raise investment capital by offering to pay dividends on profits made. An Initial Coin Offering (ICO) is the crypto version. Investors receive digital tokens with a monetary value attached to them.

So crypto assets are really just a more hi-tech way of paying for things or holding value e.g. investment value?

You could put it like that.

Sounds great. I don’t know what all the fuss is about. Why are regulators worrying about all this?

For a number of reasons, including financial crime and consumer protection.

OK – let’s start with financial crime. I thought encryption made things secure.

It does – and that can be a double-edged sword. It means that value transfer by cryptocurrency can be hidden by those with criminal intent.

But wouldn’t this be picked up by the banks? I thought they monitored transactions for suspicious activity.

They do – but crypto assets move outside of the traditional banking sector. Value transfer is either peer to peer –

What – like me giving you a tenner? –

Yes. Or they are via crypto exchanges. Crypto exchanges typically fall outside of the regulated sector.

Oh. I see why that could cause concern. So, what is the consumer protection angle?

There are a couple of issues here. The first one is the volatility of crypto assets. Take Bitcoin for example – because it is decentralised and therefore not pegged to a fiat currency it is governed by supply and demand and is extremely volatile. There is regulatory concern over people losing money if they invest in cryptocurrencies like Bitcoin. Some banks try to protect their customers by preventing them from purchasing Bitcoin with their credit cards.

Another issue is the potential for fraud. Unwitting investors might invest in an ICO that turns out to be a scam. This was highlighted by a ‘fake’ site that set out show how dangerous it could be. Take a look at:



One of the key differentials between crypto assets and regular fiat currency deposits and investments is that typically the entity that offers the investment is required to meet certain regulatory safeguards, and those consumers who make deposits with regulated banks, will receive some level of protection of the deposits if the bank fails. These safeguards are not available in many instances, particularly unregulated investment and ICO activity and cryptocurrency balances are therefore at risk in the event of a cyber attack or the loss of the private keys that provide access to the assets held.

So how can Compliance help?

“You and your business may not have direct dealings with Crypto Assets today, but learning more about the risks and opportunities that exist directly and indirectly may protect you and your business going forward, whilst providing new commercial opportunities.

Great Chatwell Academy of Learning provide briefings, workshop training, and certified online training courses suitable for individuals, small teams and larger businesses.”

Our team will be happy to discuss with you your requirements. Contact Us to find out more

[1] From the Greek for ‘secret writings’