The presence of digital technology has encouraged the emergence of various innovations and new findings that we may have never imagined before. One form of digital innovation is the so-called crypto assets. Crypto assets are a form of digital asset. These assets have several characteristics, namely first, using cryptography as a medium to securely access their value. Second, their distribution relies on ledger technology. Third, these assets do not require the role of a bank to issue them.
In their development, crypto assets are used to fulfill several purposes, namely as a tool for investment or as a tool for transactions. The facts show that these crypto assets, at least for now, are actually being used more as a tool for investing. In general, there are four types of crypto assets known to the public, namely cryptocurrencies, utility tokens, security tokens, and stablecoins. Crypto assets, like other assets, can be traded. There are many exchanges that facilitate the trading of crypto assets. In turn, new trading systems were introduced which most of them had in common with trading systems for trading stocks and forex. Go URL to find more info.
Cryptocurrencies are independent assets and are usually transacted within a limited network for its members only by utilizing blockchain technology. With this database system technology, all cryptocurrencies user transactions can be recorded in blocks that are protected with complex passwords. In terms of scope, Blockchain will be publicly visible (open source) like a ledger at a bank that records all customer transactions. Because it can be seen in general, the possibility of fraud can be minimized significantly. The technology can also be used for other contract-based agreements, and works in such a way that no single entity manages transactions–because everyone manages every transaction. Blockchain uses a decentralized system that allows efficiency.
When someone buys Bitcoin coins, a computer system connected to the Blockchain network will record and provide validity automatically. So, minimal errors, faster, cheaper and easier.
In contrast to cryptocurrencies, crypto assets in the form of utility tokens are usually used to access certain products or services. Meanwhile, security tokens are crypto assets whose value comes from other assets, both digital-based and physical assets. Crypto assets in the form of security tokens can be traded but still have to meet the security requirements of the regulator. Stablecoins are a type of crypto asset whose value has been linked and determined by existing traditional currencies, such as the US dollar or the euro.
Opportunities and challenges
The birth of various types of crypto assets has become the focus of regulators in various parts of the world. The presence of these crypto assets has attracted the attention of finance ministers, central bank governors, senior bankers, market analysts, and economists. Discussions and conversations cannot be separated from several issues related to the future of these assets, considering that their role is getting stronger day by day. First, currently the regulators and authorities in various countries, do not seem to have the power and ability to prohibit or regulate crypto assets in a concrete way.
The speed of growth of crypto assets has exceeded the expectations and forecasts of regulators or authorities. Second, the rapid development and growth of crypto assets today, especially those that occur in cryptocurrencies, is considered by many to have no strong foundation and fundamentals.
Skyrocketing prices also have tremendous potential for a fall because there is no very strong justification to support a persistent price increase. Many analysts and observers see the soaring value of cryptocurrencies based on the halo effect factor alone.
This is where we can see whether the rapid growth of crypto assets is indeed not in line with economic fundamentals, so further proof or study needs to be done. Third, crypto assets have become one of the most popular investment instruments, not only by individual investors, but also by institutional investors. A survey conducted by the Coalition Greenwich (2024) from the UK showed that more than 1,100 institutional investors surveyed would like to own crypto assets within the next five years.
Conditions like this indicate that crypto assets have their own charm to be part of their investment portfolio. The great interest of these institutional investors certainly provides an opportunity for crypto assets to gain recognition as one of the profitable investment instruments.
Steps forward
Although the market share of crypto assets is still relatively small when compared to other investment instruments such as securities and gold, they still have great potential to continue to grow. In the long term, it is possible that the growth in the share of crypto assets will be able to outperform various investment instruments currently available. This condition has attracted the attention of BIS (Bank for International Settlements), which is a global think tank that issues various international standards and guidelines to maintain the stability of the global financial system.
Recently BIS has issued a consultative paper on the precautionary rules of crypto assets to get input from the global community. Later, the results of the consultative paper will serve as guidelines for investors or regulators in responding to the rapid growth of crypto assets.
What the BIS does is certainly able to provide support regarding the prospects for the sustainability of crypto assets in the future without having to disrupt the stability of the global financial and monetary system. In addition, adequate education and literacy for potential individual investors who want to take advantage of crypto assets as investment instruments or payment instruments is absolutely necessary. The relatively high volatility of these crypto assets can provide huge returns in the short term. However, it also does not rule out the possibility of bringing investors to big losses.
Therefore, potential investors need to get sufficient knowledge about the intricacies of crypto assets.
The goal is to provide true and correct information about the benefits and risks of crypto assets so that they have sufficient knowledge in making decisions to buy or not to buy these assets. An ideal expectation is that individual investors who buy crypto assets are those who have truly understood and understand the potential advantages and disadvantages that come with buying and owning those assets.