What is a digital asset, and is it the same as crypto?

A digital asset, in the sense used by tax authorities and regulators, is a digital representation of value recorded on a cryptographically secured ledger such as a blockchain. Cryptocurrency is the best-known kind, so in most crypto contexts the two terms mean nearly the same thing. The exact boundaries depend on which agency or rulebook is using the word.

What are crypto assets?

Crypto asset is the term favored outside the US. The UK tax authority, HMRC, describes cryptoassets as digital representations of value or contractual rights that rely on a cryptographically secured distributed ledger. It sorts them into four groups:

• Exchange tokens, such as bitcoin, used as payment or held as investments.
• Utility tokens, which give access to goods or services on a platform.
• Security tokens, which give rights in a business, such as a share of profits.
• Stablecoins, tied to an asset with a steady value, such as a currency.

HMRC also says it does not treat cryptoassets as currency or money. In the European Union, the MiCA regulation covers crypto-assets not already regulated as financial instruments, and splits them into asset-referenced tokens, e-money tokens and all others, according to the regulator ESMA. Our guide to MiCA explains those rules.

Are crypto assets digital assets?

Yes. The IRS definition of digital assets covers any digital representation of value recorded on a cryptographically secured distributed ledger or similar technology. It names cryptocurrencies such as bitcoin, stablecoins and NFTs as examples. So every crypto asset counts as a digital asset for US tax purposes, and the IRS term is the broader of the two.

Accounting rules can be narrower still. A US accounting standard issued in December 2023 applies fair value rules only to crypto assets that are fungible, secured by cryptography, recorded on a blockchain or similar ledger, and that give no enforceable claim on other assets, according to Deloitte. NFTs fall outside it because they are not interchangeable. The point is that the same token can sit inside one definition and outside another.

What is the digital asset question on a tax return?

Form 1040 and several other US returns ask whether, at any time during the year, you received a digital asset as a reward, award or payment, or sold, exchanged or otherwise disposed of one.

According to the IRS, you answer yes if you were paid in crypto, earned it from mining or staking, sold it for dollars, swapped it for another asset, or spent it. You can answer no if you only held it, bought it with dollars and did not sell, or moved it between your own wallets without paying a fee in crypto. The IRS treats digital assets as property, so gains and losses are generally capital gains or losses.

The forms involved are covered in crypto tax forms, and the wider rules in how crypto is taxed in the US.

Rules differ by country and change often. Check the tax authority or a qualified professional for your own situation.