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Cryptocurrencies are a global phenomenon known to almost everyone. Today, it would be extremely difficult to find any major bank, a renowned accounting firm, a popular software company, or a government that has not researched or published a paper on cryptocurrencies or blockchain – PowerPoint PPT presentation

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Classifying A Cryptocurrency Security Or
Currency Or Asset?
  • Cryptocurrencies are a global phenomenon known to
    almost everyone. Today, it would be extremely
    difficult to find any major bank, a renowned
    accounting firm, a popular software company, or a
    government that has not researched or published a
    paper on cryptocurrencies or blockchain. But
    beyond this popularity, there are many
    consultants, scientists, and developers who have
    limited knowledge about cryptocurrencies.

  • What only a few people are aware of is that
    cryptocurrencies are a side product of another
    invention. Satoshi Nakamoto, the unknown inventor
    of Bitcoin, did not intend to invent a
    cryptocurrency. The most important part of
    Satoshis invention was that he found a way to
    design a decentralized digital cash system. After
    seeing all the centralized attempts fail, he
    built a digital cash system without a centralized
    authority. This was like a peer-to-peer network
    for file sharing. This marked the birth of
  • But is Cryptocurrency Classified As A Security,
    Currency, Or Asset?

What Is a Cryptocurrency?
  • A cryptocurrency is an internet-based medium of
    exchange which leverages blockchain technology to
    gain transparency, immutability, and
    decentralization. It uses cryptographical
    functions for carrying out financial
    transactions. A majority of the cryptocurrencies
    are decentralized systems based on blockchain

  • Bitcoin was the first blockchain-based
    cryptocurrency which is still very popular and
    highly valuable. As of February 2019, there were
    approx. 17.53 million bitcoins in circulation
    with their total market value being estimated at
    around 63 billion. Some of the top
    cryptocurrencies are Ethereum, Ripple, Litecoin,
    Monero, EOS, Cardano, etc. Cryptocurrencies
    provide the ability of easily transferring funds
    between two parties involved in a transaction by
    eliminating the need for a trusted third party.

Why May A Cryptocurrency Like Bitcoin Not Be
A Currency?
  • There are two main issues associated with Bitcoin
    as a currency. One is that its value is unstable
    and the other is that its transaction processing
    is too slow. The most important feature of a
    currency is that it is a stable store of value.
    It is important for the economy of a developing
    country to attract the investment it needs.

  • The value of a currency must be stable as it is
    the key to investment because people expect a
    stream of future earnings to earn back their
    investment with a considerable amount of profit.
    If the value of a currency is unstable, it will
    be difficult for an investor to predict the value
    of his future earnings accurately. This will make
    the investment less valuable. All
    cryptocurrencies are subject to an average daily
    change of at least 2 in value. Mostly their
    value is up, but sometimes it might be down.

  • Another important feature of a currency apart
    from being a stable store of value is its ability
    to facilitate transactions. The big drawback of a
    Barter system is that it is inconvenient. It is
    necessary to find two people to exchange goods.
    Three or four-way trades are complicated. This is
    why currencies replaced barter as they are more
    convenient. Now, coming to cryptocurrencies.

  • Though blockchains protect and secure
    cryptocurrencies like Bitcoin, the transactions
    are processed very slowly. As cryptocurrencies
    have a limit on the number of transactions that
    can be done in a day, it usually takes many days
    to complete a single transaction. Due to these
    drawbacks, instead of holding cryptocurrencies to
    use them as a currency, it can be used as a
    commodity asset that people trade like gold or
    silver. The ideal uses of cryptocurrencies are to
    hide wealth, conceal transactions, and make and
    lose money by trading them.

Can A Cryptocurrency Be Considered A Security?
  • The term security is usually used to describe
    financial assets that can be traded. It can be
    any form of financial instrument, associated
    tokens, or cryptocurrencies. The Howey Test is
    done to detect securities within the blockchain
    industry. The Howey Test is a result of a legal
    battle from 1946. It is a framework that helps
    determine if a particular asset can be considered
    as an investment contract (security).

  • Considering a cryptocurrency as a digital asset
    depends on the circumstances and facts that
    surround the original investment. A digital asset
    may initially be considered and sold as a
    security as it meets the definition of an
    investment contract. It is also possible for this
    designation to change over time if it is offered
    and sold in such a way that it does not meet the
    definition. Cryptocurrencies cannot be classified
    as securities as they are decentralized. They are
    not governed by a central authority whose efforts
    are a key determining factor in the enterprise.

Can We consider Cryptocurrencies As Assets?
  • Cryptocurrencies can be considered as an asset in
    terms of the lucrative returns they give. But
    cryptocurrencies also have their own issues with
    volatility in price being one of them. Liquidity
    leads to a sudden movement in cryptocurrency
    prices. There are many facets to the concept of
    liquidity. It can be defined as the ability of an
    asset to be converted into cash on demand. An
    asset, as we know, is an economic resource that
    can be controlled or owned and provides the owner
    with financial value. Assets come with an
    in-built promise of increased future value.

  • Cryptocurrencies can be sold and converted to USD
    or any other currency, whenever you want. It is
    more liquid and tends to rise in value. Even
    then, cryptocurrencies cannot be called clear-cut
    assets such as a house or gold. The top
    cryptocurrencies are currently rising in value
    and are being adopted by an increasing number of
    people every day. But we will only know what it
    truly is when it is done growing.

  • Cryptocurrencies Are certainly here to stay and
    change the world. People all over the globe are
    buying cryptocurrencies to protect themselves
    from the devaluation of their national currency.
    The cryptocurrency market is growing fast and
    wild. Each day, new cryptocurrencies are
    emerging, and cryptocurrency trading is becoming
    increasingly popular with more and more people
    indulging in it.
  • To stay updated with blockchain technology, check
    out the Blockchain council.

Blockchain Council Certifications
  • You can check out our certifications, and kick
    start your career in the Blockchain space today.
  • Certified Blockchain Expert
  • Certified Blockchain Developer
  • Certified Smart Contract Developer
  • Certified Solidity Developer
  • Certified Ethereum Developer

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