Tokens, Currencies, Coins, Assets… What the Heck Are We Talking About Anyway?
“Stablecoins are a type of cryptocurrency that act as a form of cash but sit outside the banking system. They are used to pay for other crypto assets…” Financial Times, 2 April 2025
There are a lot of names in the crypto space. People often use them interchangeably. Different countries, different companies, and different regulators all have their preferred names for what they’re talking about. But it matters that we all know what we’re talking about when we use these words and - as much as possible - use them in the same way. This is particularly true when it comes to regulation because without solid definitions, compliance is difficult.
In this Owl Explains note we’re going to tackle lexicography for commonly used terms for what we prefer to call tokens. And explain why we think ‘tokens’ is the best word to use when talking in a general sense. By the end of the article you should be able to see how the Financial Times quote at the top uses these different terms - and decide whether you think it gets them right.
Crypto: Let’s start with the fundamental word: ‘crypto’. The ‘crypto’ in cryptoasset or cryptocurrency comes from ‘cryptography’. That is, the use of codes or ‘encryption’ to provide secrecy. Cryptography is an ancient practice going back many thousands of years, at least to the ancient Egyptians. Modern cryptography has been greatly enhanced by the use of computers and new techniques. Together these allow people to create the public and private keys necessary for blockchain. The use of ‘crypto’ essentially just means that some information has been ‘encrypted’ using these modern cryptographic techniques. And in practice it is used to refer to something on a blockchain - or the whole blockchain-based sector itself.
Cryptocurrency: A cryptocurrency is, naturally enough, a type of currency utilizing ‘crypto’. But what is a currency? A currency is a type of money widely used in a particular area. It is a form of ‘money’. So by calling something a ‘cryptocurrency’, its founders are implying that it has the characteristics of money: the dollars, pounds, euros or yen that you use every day. The three fundamental characteristics of money are:
That it is a store of value. That is, that what you hold today will be worth the same amount tomorrow.
That it is a means of exchange. That is, that other people will be happy to take it in exchange for goods or services they provide.
That it is a unit of account. That is, that you can price a good or service in it.
While ‘cryptocurrency’ was one of the first ways of describing these blockchain-based units, it is now largely out of favor since many (or even most) don’t fulfil these three characteristics. When was the last time you heard someone price something in Dogecoin?
Cryptoasset: More popular nowadays is the term ‘cryptoasset’ (and note that there are different ways of spelling this: all one word, with a hyphen, or as two separate words). But what’s an asset? An asset is something that has (financial) value. So a cryptoasset is something on the blockchain that holds (or represents) value. This makes sense as a term, given that many people buy or sell ‘cryptoassets’ as speculation (to make money) or because it offers them access to something else that has value (like a blockchain protocol or a good or service in the real world). But while this is a useful term that is in wide use, it does also have one issue with it: it implies the crypto ’asset’ does have some sort of value. Which they don’t always. For example, a tokenized digital record, such as a diploma, might not ever have (or be intended to have) a value. So calling them ‘cryptoassets’ would imply a use - and therefore a form of regulatory treatment - that doesn’t make sense. This is one of the reasons we stress token classification, including in our submission to the SEC Crypto Task Force. This terminology matters when it comes to thinking about the correct regulatory treatment for things on the blockchain. Nowadays when a regulator or government official says ‘crypto’ they’re referring to a cryptoasset - and probably including the idea of a ‘cryptocurrency’ within it.
Stablecoin: Stablecoins are a unique type of ‘cryptoasset’ that attempt to maintain a stable value against a reference asset. Usually today this reference asset will be a so-called ‘fiat currency’: in other words, the normal currency of any given country (dollars, pesos, etc.). In this sense they are a ‘crypto’ or on-chain representation of normal money that already exists, and they fulfil the three functions of currency by ‘piggybacking’ on the underlying existing fiat currency. Previously (around 2018-2019) the term was used more loosely to mean something that tried to reduce volatility in the value of a cryptoasset - either through its backing asset or via an algorithm. Now, largely driven by regulation, ‘stablecoin’ tends to only refer to a token that is pegged one for one to a single fiat currency, or perhaps sometimes to a group (a ‘basket’) of different fiat currencies. So depending who you’re talking to, ‘stablecoin’ could be referring to the whole universe of ‘stablecoins’ that attempt to minimise volatility or just to those, more common now, that maintain a stable value against the reference asset or fiat currency.
Central Bank Digital Currency (CBDC): A CBDC is very similar to a stablecoin, in that it is the ‘digital’ version of a fiat currency, except that it is created by a government’s Central Bank or other monetary authority. That is, a CBDC is issued by a country’s public sector and is a direct liability of that authority. There is therefore no private sector company responsible for it, or which could go bankrupt or fail to provide it. That makes it very safe, in an economic sense, for people who hold it. Many countries are still exploring developing a CBDC, and there are significant ongoing political discussions around questions like privacy rights and the ability of governments (or Central Banks) to control how a CBDC might be used by citizens and businesses.
Digital [currency/asset/cash]: As you’ll have seen in the term CBDC, this is not called ‘crypto’ but ‘digital’. That’s because ‘crypto’ implies something on a blockchain, as we’ve seen, and through its meaning about the wider sector still sometimes has a negative connotation. Central Banks don’t want to be associated with that - and anyway may not issue on a blockchain. So they used ‘digital’. That makes sense as far as it goes, but has one major problem: the overwhelming majority of ‘traditional’ money is also digital because it exists as commercial bank deposits (and indeed as Central Bank reserve deposits). These deposits are purely digital in that the value solely exists as information inside bank computers. Calling something blockchain-based as ‘digital’ does not really help distinguish it. In other words, digital is a much broader category that includes crypto.
Virtual [currency/asset/cash]: Some people use the term ‘virtual’ in an attempt to get around this confusion, though it’s now a little less used than it used to be. ‘Virtual’ covers basically the same ground as ‘digital’ but without the confusion about existing bank deposits. In this sense it’s really used as a synonym for ‘on-chain’: that is, something based on a blockchain. Virtual has more traditionally been used to mean anything on the internet, such as people referring to a “virtual meeting” when they do a video call. For these reasons, by and large the term ‘crypto’ is winning out as the main usage for something on-chain.
All these terms are in use, but all have problems. So what does Owl Explains use?
Well, we prefer the term ‘Token’. This word refers to something that is used to represent an asset, item, bundle of rights or thing. It does not necessarily imply financial value (like ‘asset’) or money (like ‘currency’). It is technology neutral, so does not imply something has to be blockchain-based (like ‘crypto’) or not (like a CBDC) - and indeed it even applies to non-digital/virtual representations like those that are based on paper (like old time stock certificates or tickets to an event) or metal (like subway tokens). A ‘token’ can refer to all these things without implying any characteristic, and therefore without prejudging any regulatory treatment. And the word ‘token’ allows anything to be ‘tokenized’ or ‘represented by a token’, which is a major growth area for the blockchain sector at the moment.
In an upcoming post, we’ll explain how tokens themselves can be classified from a regulatory and market point of view.
