In its most basic definition, digital assets can be defined as anything that exists in a digital form. The phrase ‘digital assets’ is used to refer to traditional, physical media formats such as documents, photos, and videos that began to be created, stored, and shared in a digital environment.
Over the past few years, the trend of investing in “digital assets” grew in popularity. Many people saw the potential and began investing in them. In the past, investors still understood that digital assets were digital currencies known as cryptocurrencies. However, investing in digital assets extends well beyond cryptocurrencies.
What Exactly Are Digital Assets?
As the name indicates, digital assets can be defined as assets in a digital format. Even though this term refers to digitalized media content, the emergence of blockchain technology has expanded the meaning of digital assets. The expansion includes new investable asset types that can go by many names: tokens, coins, cryptocurrencies, crypto, and many more.
From the standpoint of the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019, they are categorized into digital currency and digital tokens – even though digital assets come in many other forms. Besides digital media files, you can also tokenize physical assets such as commodities and real estate to create a digital asset for trading. This situation creates new possibilities for digital assets marketplaces.
Examples of Digital Assets Trading
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Cryptocurrencies
Cryptocurrencies are perhaps the most well-known form of digital assets. Types of cryptocurrency such as Bitcoin and Ethereum are generally not issued by any central authority. It means that they are immune to interference or manipulation from the government.
Also, “crypto” refers to the various encryption algorithms and cryptographic techniques that safeguard these entries. This makes it almost impossible to counterfeit or double-spend a cryptocurrency.
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NFTs
NFTs stands for ‘non-fungible tokens’. They are treated as titles or deeds to prove that your ownership over a particular digital asset. This digital asset comes in many forms, such as a digital art piece, a song snippet, or even a tweet. You can also use NFTs as physical objects for a specific purpose, like trading cards. People then can buy the assets with cryptocurrency or fiat money (i.e., government-issued currencies, like Malaysian Ringgit).
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Asset-backed tokens
Asset-backed tokens are an evolution in the digital assets world. You can tokenize traditional, physical assets, such as gold, oil, soybeans, or any other physical asset, then trade them amongst users on the blockchain. This digital assets evolution is designed to be more stable, store value, and can be exchanged between users without having a financial institution act as the middleman.
More Malaysians Recognize Digital Asset Potential
As mentioned, many Malaysians are probably familiar with some types of cryptocurrencies. This shows that more people are starting to realize the potential of digital assets. According to a study, Malaysia has been rated among the top 20 countries intrigued by cryptocurrency. In fact, Malaysia’s digital assets market continued to grow last year. There were about RM21 billion in digital assets exchanged across the four digital asset exchanges (DAXs).
There are three registered RMOs (Recognized Market Operators) where people can do digital asset exchanges in Malaysia. Make sure you choose a secure platform that provides regulated digital assets exchanges instead of unregulated exchanges.
Also, it’s important to note that Bank Negara Malaysia (BNM) doesn’t recognize digital currency as a legal tender or a payment instrument. Digital currency doesn’t represent the universal characteristics of money due to its volatility and speculative nature that affects its stability.
The coming of investable digital assets represents a new investment opportunity. Although digital assets are attractive investment assets, they are still considered a whole new portfolio in the investing landscape. Therefore, you must thoroughly study each asset’s pros and cons before making an investment decision.
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