Is crypto a Asset or Currency?

There is a lot of disagreement about whether cryptocurrency is an asset or a currency because its features are essentially the same in both. Cryptocurrency has some features that help it to be treated as a currency but many times we see some more features that make it an asset. If cryptocurrency is a currency, then its regulation, operation and control will be from one type of authority and if it is an asset then its regulation, operation and management will be from another sector. That is why it is a matter of debate whether it is a currency or an asset. Cryptocurrency has a unique position within the financial system. Its classification can vary depending on regulatory perspectives, use cases, and the specific cryptocurrency in question.

In today's post I will explain some of the reasons or rationale behind cryptocurrency being an asset and in the next post I will share why cryptocurrency is a currency. Next, I will try to draw a line between the two.

Why Crypto is an Asset:

Investment:

Many people view cryptocurrencies as an investment vehicle akin to traditional assets like stocks or commodities. This is most often the case when we talk about leading cryptocurrencies like Bitcoin, Ethereum, Litecoin. Because these currencies are market leaders, they are used by anyone as an investment tool and because of this feature, many consider them an asset. Investors buy cryptocurrencies with the expectation that their value will appreciate over time. They are getting profit from price fluctuations.

Store of Value:

Some cryptocurrencies like Bitcoin are compared to digital gold due to their scarcity and the belief that they can serve as a store of value. We believe that something has value when we can store it as an asset. And this is one of the main features in terms of resources. This characteristic of assets seems to be shared by leading cryptocurrencies such as Bitcoin. This aligns with the traditional role of assets as a means of preserving wealth.

Lack of Inherent Use:

They are not like traditional currencies. Cryptocurrencies lack of widespread acceptance as a medium of exchange in everyday transactions. This leads some to classify them as assets rather than currencies.

Capital Gains Taxation:

In many jurisdictions, cryptocurrencies are subject to capital gains taxation when sold, reinforcing their classification as assets intended for investment.

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