What Is a Digital Asset? Types & Payments

This content does not constitute investment advice. References to specific digital assets (including Bitcoin, Ethereum, XRP, USDC, and others) are made for informational and illustrative purposes only. Digital assets carry significant risk including potential loss of principal.

What Is a Digital Asset?

A digital asset is any value-bearing item that exists in electronic form, can be owned or transferred, and is secured through cryptographic or distributed ledger technology, encompassing cryptocurrencies, stablecoins, central bank digital currencies, non-fungible tokens, and tokenized representations of traditional financial instruments.

Key Takeaways

• Digital asset is the broader category. Cryptocurrency is one subcategory within it, not a synonym.
• Five primary types: cryptocurrency, stablecoin, CBDC, NFT, and tokenized real-world asset.
• Stablecoins and CBDCs carry the highest payments relevance among all digital asset types.
• Blockchain enables settlement finality in seconds to minutes versus days on traditional rails.
• Digital assets are subject to regulatory oversight in most major jurisdictions, including the US and EU.

Three properties define every digital asset: it exists in electronic form, it holds or represents value, and it can be owned, transferred, or traded. While cryptocurrency is the most recognized digital asset type, the two terms are not interchangeable. Cryptocurrency represents one subcategory within the broader digital asset category, alongside stablecoins, central bank digital currencies, non-fungible tokens, and tokenized real-world assets.

Digital currency refers specifically to electronic money, and it is a subset of the broader digital asset category. All digital currencies are digital assets, but not all digital assets are digital currencies. An NFT, for example, is a digital asset but not a digital currency.

The term "digital asset" in this article refers exclusively to its financial and payments definition. It does not refer to digital media assets (the marketing context covering images and videos). Standard electronic bank balances and digital documents also fall outside this definition because they lack the cryptographic security and decentralized ownership properties that characterize financial digital assets.

In banking and financial services, digital assets are increasingly relevant to payment settlement, custody services, trade finance, and cross-border transaction infrastructure. They represent both an opportunity to reduce correspondent banking friction and a compliance challenge requiring new frameworks.

Types of Digital Assets

Digital assets fall into five primary categories, each with distinct characteristics and varying degrees of relevance to payment applications: cryptocurrency, stablecoin, central bank digital currency (CBDC), non-fungible token (NFT), and tokenized real-world asset.

Stablecoins and payment applications

A stablecoin is a digital asset designed to maintain a stable value by pegging to a reference asset, most commonly the US dollar, eliminating the price volatility that makes standard cryptocurrencies impractical for everyday payments.

Stablecoin definition: A stablecoin is a digital asset pegged to a reference asset (typically the US dollar) through fiat currency reserves held in regulated financial institutions. Unlike volatile cryptocurrencies, stablecoins maintain a fixed value, making them suitable for commercial payment transactions.

Most fiat-collateralized stablecoins maintain their peg through dollar reserves. USDC (USD Coin), issued by Circle, is backed 1:1 by US dollars held in regulated financial institutions. USDT (Tether) operates similarly. A stablecoin functions like a tokenized dollar: it holds the value of a USD but moves with the speed and programmability of a blockchain transaction, rather than the 2-3 business day timeline of an ACH transfer.

In 2023, Visa expanded its stablecoin settlement program to use USDC on the Solana blockchain, enabling participating merchant acquirers to settle funds in USDC rather than waiting for traditional fiat settlement cycles. For payment applications, fiat-collateralized stablecoins (USDC, USDT) remain the operationally deployed standard; the TerraUSD collapse in 2022 largely discredited algorithmic alternatives.

Central bank digital currencies (CBDCs)

A central bank digital currency (CBDC) is a digital currency issued and backed by a central bank, the digital equivalent of physical cash, carrying the full faith and credit of a national government.

CBDC definition: A central bank digital currency (CBDC) is sovereign-issued digital money, functionally equivalent to physical banknotes but existing in electronic form on a government-administered ledger. CBDCs are centralized, government-controlled, and operate on permissioned infrastructure in most implementations.

CBDCs differ from both cryptocurrency and stablecoins on two key dimensions. First, they are centralized and government-controlled, whereas cryptocurrencies are decentralized with no central issuing authority. Second, they are direct government liabilities, whereas stablecoins are private-sector instruments pegged to fiat currency.

China's Digital Yuan (e-CNY), issued by the People's Bank of China, is the most deployed retail CBDC globally. The European Central Bank is developing the Digital Euro. According to the BIS CBDC Tracker, over 130 countries representing 98% of global GDP are actively exploring CBDCs as of 2024, though most major economies remain in pilot or research phase.

Cryptocurrency

Cryptocurrency is a decentralized digital currency secured by cryptography, operating on a public blockchain without a central issuing authority, and it is the most recognized subcategory of digital assets, though not a synonym for the broader category.

Bitcoin (BTC), created in 2009 by the pseudonymous Satoshi Nakamoto, established the foundational model for decentralized digital assets. Ethereum (ETH) is the leading smart contract platform, serving as infrastructure for most stablecoin issuance and tokenized asset pilots. Beyond payments specifically, the broader cryptocurrency ecosystem has given rise to decentralized finance (DeFi), referring to lending, borrowing, trading, and other financial services built on public blockchains and operated by smart contracts rather than traditional intermediaries.

For payments, standard cryptocurrency presents a specific challenge: price volatility means a $100 payment could be worth $80 by the time it settles. Bitcoin's Lightning Network, a Layer 2 payment protocol that processes transactions off the main blockchain and settles them in batches, enables near-instant micropayments with fees under one cent. XRP, created by Ripple Labs specifically for cross-border payment settlement, is the primary exception discussed in the payments use cases section.

Non-fungible tokens (NFTs) are unique digital assets representing ownership of a specific item, whether digital art, a collectible, intellectual property rights, or a real-world asset, with provenance recorded on a blockchain. NFTs are non-fungible, meaning each token is unique and cannot be exchanged on a 1:1 basis with another. By contrast, fungible digital assets like USDC are interchangeable, with each unit identical in value to any other. NFTs carry Low payments relevance because they function as ownership certificates, not payment instruments.

Tokenized real-world assets are traditional financial instruments (bonds, equities, real estate, commodities, or trade receivables) converted into digital tokens on a blockchain, enabling fractional ownership, programmable transfer, and 24/7 settlement. Tokenization in the digital asset context means converting rights to a real-world asset into a blockchain token. This differs from tokenization in payment card security, which replaces card numbers with surrogate values for PCI-DSS compliance. The two processes are entirely distinct, and payments professionals familiar with card tokenization standards should not conflate them.

BlackRock's BUIDL fund, launched on Ethereum in 2024, tokenized US Treasury bonds, giving institutional investors access to fractional government bond positions with same-day settlement. Tokenized assets can also serve as collateral in B2B payment settlement or as programmable payment instruments in trade finance.

Understanding these five types establishes the taxonomy. The next step is understanding how the underlying technology makes digital asset transactions function.

How Digital Assets Work: The Technology Behind the Transaction

Three technological components form the infrastructure layer that enables digital asset payment transactions: the blockchain, smart contracts, and digital wallets. Together, they perform the role that banks and clearinghouses play in traditional payment flows.

Blockchain and distributed ledger technology

Blockchain (a type of distributed ledger technology, or DLT) is the foundational infrastructure through which digital assets are issued, verified, transferred, and settled. It functions as the shared record-keeping system that enables peer-to-peer value transfer without a central authority. A blockchain is a shared, tamper-resistant record of transactions maintained simultaneously across a network of computers, with no single entity controlling it. Distributed ledger technology (DLT) refers to any shared, decentralized record-keeping system; blockchain is the most widely known form, though other architectures exist.

Blockchain enables digital asset transactions across four sequential functions:

1. Issuance: Digital assets are created and recorded on the blockchain at origin.
2. Verification: The network validates that the payer holds sufficient balance and the transaction is legitimate, without requiring a bank to authorize it.
3. Transfer: Value moves from the payer's wallet address to the payee's wallet address, recorded as an immutable transaction on the shared ledger.
4. Settlement: The transaction reaches settlement finality, the point at which a payment transaction is irrevocably complete and the transferred value belongs definitively to the recipient.

Blockchain performs the function that correspondent banks and clearinghouses perform in traditional payments: verifying transactions, maintaining records, and facilitating value transfer. It does so automatically, without a central intermediary, and with near-instant settlement. On most public blockchains, settlement finality is achieved in seconds to minutes, compared to 1-2 business days for ACH, 2-5 business days for SWIFT international wires, and 2-3 business days for card networks.

Smart contracts and programmable payments

A smart contract is a self-executing program stored on a blockchain that automatically carries out predefined terms when specified conditions are met. Think of it as a digital vending machine: insert the correct input, and it delivers the agreed output without a human intermediary.

Smart contracts extend digital assets beyond simple value transfer into programmable, automated payment flows. A manufacturer can program a smart contract to automatically release payment to a supplier when IoT sensors confirm goods have arrived at the warehouse, eliminating invoice processing delays and creating an immutable audit trail. Ethereum is the leading smart contract platform, serving as the infrastructure layer for most stablecoin issuance and programmable payment applications.

Digital wallets: the account interface

A digital wallet is software (or hardware) that stores the cryptographic keys required to access and transact digital assets on a blockchain, functioning as the account interface for the digital asset system. This is distinct from consumer digital wallets like Apple Pay or Google Pay, which store card credentials rather than cryptographic keys.

Two types are relevant to business payment contexts. A custodial wallet is managed by a third party (a payment processor or exchange) that controls the cryptographic keys on behalf of the account holder, making it simpler for businesses. A non-custodial wallet gives the user direct control over their own keys, which is more complex but fully self-sovereign. Cryptocurrency exchanges (platforms such as Coinbase, Kraken, and Binance) serve as the on-ramp and off-ramp between traditional fiat currency and the digital asset system.

For merchant adoption, custodial wallet infrastructure provided by licensed payment processors means businesses do not need blockchain technical expertise to accept digital asset payments.

Digital Assets in Payments: Key Use Cases

Digital assets function in payments as an alternative settlement layer, enabling faster, lower-cost, and more programmable transfer of value than traditional payment rails currently allow. A payment rail is the underlying infrastructure network through which value moves between parties. Traditional rails include ACH, SWIFT, Fedwire, and card networks. Blockchain-based digital assets represent an emerging set of payment rails with materially different settlement characteristics.

Cross-border and international payments

Cross-border payment settlement is the use case where digital assets demonstrate the most measurable advantage over traditional infrastructure today.

Traditional cross-border payments via SWIFT correspondent banking involve multiple intermediary banks, 2-5 business day settlement timelines, and fees averaging 6-7% of transaction value for retail remittances, according to the World Bank Remittance Prices Worldwide database.

Blockchain-based digital assets eliminate most of these intermediary hops by moving value directly between sender and recipient on a shared ledger. XRP, created by Ripple Labs specifically for cross-border payment settlement, demonstrates this mechanism concretely. XRP acts as a bridge currency. A payment sender's local currency is converted to XRP and transferred to the recipient's country in seconds. The recipient then receives funds in their local currency, bypassing the multi-bank correspondent chain that SWIFT requires. RippleNet serves financial institutions in over 40 countries, with settlement typically occurring in 3-5 seconds at under $0.01 per transaction.

USDC-based remittance services have also been deployed for transfers to Latin America and Southeast Asia. In 2023, Circle integrated USDC into cross-border B2B payment flows via SWIFT connectivity, enabling businesses to settle international invoices in USDC with same-day finality.

Note: The SEC filed an enforcement action against Ripple Labs in 2020, and in 2023 a federal court ruled that XRP sold on public exchanges does not constitute a security under US law. The regulatory classification of institutional XRP sales remains subject to ongoing proceedings, illustrating the evolving compliance context for digital asset payments.

Stablecoin payments for businesses

Stablecoins are the digital asset subcategory most actively deployed in commercial payment infrastructure, specifically because their price stability eliminates the exchange-rate risk that makes volatile cryptocurrencies impractical for transactional use.

Three institutional deployments illustrate adoption at scale:

1. Visa/USDC/Solana (2023): Visa expanded its stablecoin settlement program to use USDC on the Solana blockchain, enabling participating merchant acquirers to settle funds in USDC rather than waiting for traditional fiat settlement timelines.
2. Cross-border B2B via Circle (2023): Circle announced USDC integration with the SWIFT network. Businesses can now send and receive USDC-denominated payments using existing SWIFT infrastructure.
3. Stripe stablecoin payments (2024): Stripe launched a stablecoin payment product enabling merchants to accept and settle payments in USDC, with automatic conversion to fiat for merchants who prefer traditional currency settlement.

For merchants accepting stablecoin payments, licensed payment processors handle converting digital assets to fiat currency automatically upon receipt.

B2B settlement and programmable payments

Business-to-business payments represent one of the most operationally compelling applications of digital assets, because smart contracts can automate payment release based on verifiable real-world conditions without manual invoice processing or reconciliation.

A logistics company can program a smart contract to release payment to a freight carrier automatically when GPS data confirms delivery at the destination warehouse. The payment executes without an accounts payable clerk, without a bank authorization step, and with an immutable record on the blockchain ledger.

JPMorgan Onyx, JPMorgan's blockchain division, has deployed intraday repo settlement on blockchain infrastructure, enabling financial institutions to execute same-day collateral movements that traditionally required overnight or T+1 settlement. Additional B2B applications include programmable invoice settlement in stablecoins and tokenized letters of credit that eliminate 5-10 day documentary processing in trade finance.

CBDC payments and government digital currency

Central bank digital currencies represent the sovereign-issued end of the digital payment spectrum. The Digital Yuan (e-CNY), issued by the People's Bank of China, is the most deployed retail CBDC globally. Chinese consumers use it for everyday domestic commerce, and the government has tested programmable distribution of government benefits through e-CNY, demonstrating CBDC's conditional payment capability.

For cross-border wholesale settlement, the BIS Innovation Hub's mBridge project enables direct central bank settlement between participating countries without correspondent banking intermediaries. The project involves central banks from China, Hong Kong, Thailand, the UAE, and other jurisdictions. As of 2024, most major economy CBDCs remain in pilot or research phase.

Accepting digital asset payments: a business overview

Businesses can accept digital asset payments without blockchain technical expertise by working with licensed payment processors that handle custody, compliance, and settlement.

1. Choose a licensed processor (BitPay, Coinbase Commerce, or Stripe's crypto payment product).
2. Integrate via API or plugin into existing point-of-sale or e-commerce payment infrastructure.
3. Configure settlement currency preference (stablecoin, cryptocurrency, or automatic fiat conversion).
4. Compliance is handled by the processor, which operates under money transmission licenses with built-in Anti-Money Laundering (AML) and Know Your Customer (KYC) verification tools.

Digital Assets vs. Traditional Payment Systems

Digital asset payment rails differ from traditional payment infrastructure across seven measurable dimensions, summarized in the comparison table below.

Digital assets are not positioned to replace traditional payment systems in the near term, but they are increasingly integrated with them. Visa, Mastercard, and PayPal have each built digital asset settlement capabilities alongside their traditional infrastructure, suggesting a trajectory of coexistence rather than displacement.

Digital assets already outperform traditional rails in three specific contexts: cross-border settlement speed and cost, 24/7 availability regardless of banking hours, and programmable B2B payment automation through smart contracts. Traditional rails hold clear advantages where transaction reversibility matters, where regulatory maturity is required, and where broad merchant acceptance is essential. For standard consumer payments requiring chargeback protection, traditional card infrastructure remains the operationally established choice. For context on how card payment processes work, see card payment FAQs.

Benefits and Challenges of Digital Asset Payments

Digital asset payments carry documented advantages over traditional rails in specific use cases, alongside genuine risks that businesses must evaluate before adoption.

Benefits of digital asset payments

• Speed. Settlement finality on most public blockchains occurs in seconds to minutes, compared to T+1 for ACH and T+2 to T+5 for SWIFT international wires. Faster finality reduces float exposure and improves working capital efficiency.

• Cost reduction. Intermediary fees for cross-border transactions via correspondent banking average 6-7% for retail remittances, according to World Bank data. Blockchain-based settlement can reduce this to under 1%.

• Programmability. Smart contracts enable automated, conditional payment logic that traditional rails cannot replicate natively. Payment release upon delivery confirmation, escrow arrangements, and revenue-sharing distributions can all be encoded directly into the payment instrument.

• Accessibility. Digital asset payment networks operate 24/7/365 with no dependency on banking hours, correspondent bank availability, or national holiday calendars.

• Transparency. Transaction records on public blockchains are immutable and auditable, providing a tamper-resistant audit trail that simplifies reconciliation and supports compliance reporting.

Challenges and risks of digital asset payments

• Price volatility. Standard cryptocurrencies expose businesses to exchange-rate risk between payment initiation and settlement. Mitigation: stablecoins eliminate this risk by maintaining a fixed fiat peg.

• Regulatory uncertainty. Digital asset regulatory frameworks are still being established in most jurisdictions. Businesses may face evolving compliance obligations, including potential retroactive requirements as new rules take effect.

• Custody risk. Loss of private cryptographic keys means permanent loss of the associated digital assets with no recovery mechanism. Mitigation: custodial payment processors hold keys on behalf of businesses.

• Transaction irreversibility. Blockchain transactions are generally final once confirmed and cannot be reversed through a standard chargeback mechanism. Mitigation: escrow smart contracts and processor-level dispute resolution services can provide some recourse, though the mechanism differs fundamentally from card network chargebacks.

• Counterparty risk. Exchange or processor failure can result in loss of funds held in custody. The FTX collapse in 2022 demonstrated that this risk is material. Mitigation: use licensed processors operating under money transmission regulations.

These risks are real and should be evaluated on a use-case basis. Stablecoin adoption addresses the most common barrier (volatility), and licensed processor infrastructure addresses custody and compliance complexity.

Digital Asset Regulation and Compliance

Digital assets are subject to regulatory oversight in most major jurisdictions, though the applicable framework varies significantly by country and asset type.

The regulatory landscape for digital assets is evolving rapidly. This content reflects publicly available information as of the date of publication and should not be construed as legal or compliance advice. Organizations should consult qualified legal counsel for guidance on specific compliance obligations.

US regulatory framework

In the United States, digital asset regulation is divided among multiple federal agencies, each with jurisdiction over a distinct aspect of the asset category.

• SEC (Securities and Exchange Commission): The SEC regulates digital assets classified as securities under the Howey Test, the legal standard for determining whether an instrument constitutes an investment contract. The SEC's 2019 SEC Framework for Investment Contract Analysis of Digital Assets provides the agency's analytical framework. Digital assets meeting the Howey Test criteria fall under SEC jurisdiction.

• CFTC (Commodity Futures Trading Commission): The CFTC has asserted commodity jurisdiction over Bitcoin and Ethereum. The regulatory classification of most other digital assets remains subject to ongoing legal interpretation.

• FinCEN (Financial Crimes Enforcement Network): FinCEN enforces AML and Bank Secrecy Act compliance for digital asset businesses classified as money services businesses (MSBs). Per FinCEN guidance on digital asset businesses, exchanges, payment processors, and custodians must comply with MSB registration, AML program, and suspicious activity reporting requirements.

• FIT21 (Financial Innovation and Technology for the 21st Century Act): The US House passed FIT21 in 2024, providing a more defined framework for SEC vs. CFTC jurisdiction. Senate consideration was ongoing as of the publication date.

The 2023 partial ruling in SEC v. Ripple Labs, which found that XRP sold on public exchanges does not constitute a security, represents one significant data point in the evolving SEC jurisdiction landscape.

International regulatory frameworks

The most significant recent regulatory development outside the United States is the EU's Markets in Crypto-Assets Regulation (MiCA), which became fully effective in December 2024 and represents the most thorough single digital asset regulatory framework enacted globally to date. MiCA establishes licensing requirements for crypto-asset service providers, stablecoin issuers, and exchanges operating within the European Union.

The Financial Action Task Force (FATF) classifies digital assets as "virtual assets" and digital asset businesses as "virtual asset service providers" (VASPs). FATF Virtual Asset guidance sets the Travel Rule requirement: digital asset service providers must collect and share originator and beneficiary information for transfers above threshold amounts ($3,000 in the US). DeFi protocols are also subject to growing regulatory scrutiny, with both the SEC and international bodies signaling intent to apply existing financial regulations to decentralized platforms.

Different jurisdictions use different terminology: "digital asset" (US regulatory and commercial usage), "virtual asset" (FATF AML guidance), and "crypto-asset" (EU MiCA regulation). These terms refer to substantially the same category of blockchain-based value instruments.

AML/KYC compliance: Anti-Money Laundering (AML) rules require financial institutions to detect and report suspicious transactions. Know Your Customer (KYC) requirements mandate identity verification before onboarding customers or processing transactions. Digital asset payment providers are classified as money services businesses in most major jurisdictions and are subject to the same AML/KYC frameworks as traditional payment processors. Major processors including Circle, Coinbase Commerce, and BitPay operate under money transmission licenses with AML/KYC programs equivalent to those required of traditional payment processors. Digital assets are not anonymous or unregulated.

Tax treatment: The IRS treats most digital assets as property for tax purposes, per IRS Notice 2014-21. Converting a digital asset to fiat currency, using it to pay for goods or services, or trading one digital asset for another may each constitute a taxable event. Tax treatment of digital assets varies by jurisdiction and asset type. This content does not constitute tax advice. Businesses and individuals should consult a qualified tax advisor regarding their specific tax obligations.

Frequently Asked Questions About Digital Assets in Payments

What is a digital asset in simple terms?

A digital asset is any value-bearing item that exists in electronic form, can be owned or transferred, and is secured by cryptography. Think of it as the digital equivalent of any valuable item you could own, like cash, stocks, or property, except it exists entirely in electronic form and is managed on a shared digital ledger rather than through a bank or broker.

Are all cryptocurrencies digital assets?

Yes. All cryptocurrencies are digital assets, but digital asset is the broader category. Cryptocurrencies represent one subcategory within it. Other subcategories include stablecoins, CBDCs, NFTs, and tokenized real-world assets. Not all digital assets are cryptocurrencies.

What is the difference between a digital asset and cryptocurrency?

Digital asset is the broader category that includes any value-bearing item in electronic form secured by cryptographic or distributed ledger technology. Cryptocurrency is one specific type: a decentralized digital currency secured by cryptography, operating on a public blockchain. All cryptocurrencies are digital assets, but not all digital assets are cryptocurrencies. Stablecoins, CBDCs, NFTs, and tokenized bonds are digital assets but are not cryptocurrencies.

Is Bitcoin a digital asset?

Yes. Bitcoin is a digital asset and specifically a cryptocurrency, the most recognized subcategory of digital assets. Created in 2009, Bitcoin was the first digital asset to demonstrate that value could be transferred peer-to-peer without a central intermediary. It remains the largest cryptocurrency by market capitalization.

What is a stablecoin and how is it used in payments?

A stablecoin is a digital asset pegged to a reference asset (typically the US dollar) to maintain price stability, making it practical for commercial payment transactions. In 2023, Visa settled transactions using USDC (a fiat-collateralized stablecoin issued by Circle) on the Solana blockchain, enabling merchant acquirers to receive settlement in USDC with same-day finality rather than waiting for traditional fiat settlement cycles.

How are digital assets used in payments?

A payer initiates a transaction from their digital wallet, broadcasting it to the blockchain network. The network verifies that the payer holds sufficient balance without requiring a central authority to authorize it. Settlement finality is achieved in seconds to minutes, at which point the funds are irrevocably transferred to the recipient's wallet. Stablecoin payments settle in seconds with price stability; CBDC payments route through central bank-administered infrastructure.

How do digital assets enable faster cross-border payments?

Traditional SWIFT correspondent banking requires 2-5 business days for cross-border settlement and averages 6-7% in fees for retail remittances, according to World Bank Remittance Prices Worldwide data. Blockchain-based digital assets eliminate most correspondent banking intermediary hops by moving value directly between parties on a shared ledger. XRP on RippleNet settles cross-border payments in 3-5 seconds at under $0.01 per transaction.

What are the risks of using digital assets for payments?

Four primary risks apply: price volatility (mitigated by using stablecoins instead of volatile cryptocurrencies); regulatory uncertainty, as frameworks continue to evolve and compliance obligations vary by jurisdiction; custody risk, where loss of private keys means permanent asset loss (mitigated by custodial payment processors); and transaction irreversibility, where blockchain payments are generally final and cannot be reversed through a standard chargeback mechanism.

Are digital assets regulated?

Yes. Digital assets are subject to regulatory oversight in most major jurisdictions. In the United States, the SEC regulates digital assets classified as securities, the CFTC regulates cryptocurrency derivatives, and FinCEN enforces AML/KYC compliance for digital asset businesses as money services businesses. The EU's Markets in Crypto-Assets Regulation (MiCA) became fully effective in December 2024. FATF sets AML standards for virtual asset service providers globally.

What is the difference between a digital asset and a digital currency?

A digital currency is a type of digital asset specifically designed to function as electronic money, a medium of exchange or store of value. Digital asset is the broader category that also includes non-monetary value representations. An NFT is a digital asset but not a digital currency. Tokenized real estate is a digital asset but not a digital currency. All digital currencies are digital assets; not all digital assets are digital currencies.

How are digital assets taxed?

In the United States, the IRS treats most digital assets as property for tax purposes under IRS Notice 2014-21. Converting a digital asset to fiat currency, using it to pay for goods or services, or trading one digital asset for another may each constitute a taxable event. Tax treatment varies by jurisdiction and asset type. This content does not constitute tax advice. Consult a qualified tax advisor regarding your specific tax obligations related to digital asset transactions.

What is a CBDC?

A central bank digital currency (CBDC) is a digital currency issued and backed by a central bank, carrying the full faith and credit of the issuing government. It is the digital equivalent of physical cash. CBDCs are centralized and government-controlled, distinguishing them from decentralized cryptocurrencies and private-sector stablecoins. China's Digital Yuan (e-CNY) is the most deployed retail CBDC globally. As of 2024, most major economies have CBDCs in pilot or research phase.

Related Reading

• Converting digital assets to fiat currency
• Card payment FAQs