By - Prithiviraj Senthil Nathan on October 12, 2022
The age of information has witnessed technology to be an instrument of exponential advancement in civilization. Today, data, images, and digital currencies have garnered significant importance equivalent to physical assets. Digital assets primarily consist of commodities such as images, documents, data, or cryptocurrency which are held in digital format and can be assigned a specific value. The interest in possessing fintech digital assets has garnered significant importance in recent days .
Following the introduction of the first cryptocurrency, Bitcoin, in 2008, the concept of blockchain grew in relevance . The concept, in principle, was not new because digital assets had already garnered value by then and required security measures, management, and storage. For a digital asset to be considered an asset, it must satisfy certain conditions:
With the increasing value generated by digital assets, service providers for Digital Asset Management (“DAM”) have emerged. DAM ensures digital security for organizations and businesses and allows them to store, organize and access their digital assets securely and quickly. This article will explain what digital assets are and the significance of Digital Asset Management in the following ways:
As per Gartner’s Glossary, digital assets are any digital materials that are owned by a business or an individual . It includes any text, graphics, video, audio, images, documents, and presentations that create some sort of value for the individual or the enterprise.
Broadly, digital assets are of the following types:
With the introduction of blockchain technology, several commodities and crypto assets including but not limited to the ones set out below were included within the ambit of digital assets.
Having identified the commonly known digital assets, it is crucial to note that with the introduction of new and upcoming digital formats in businesses, the definition of digital assets is a dynamic one and continues to expand .
Bitcoin is the most well-known cryptocurrency which fulfils the conditions for a digital asset because:
Although Bitcoin is a cryptocurrency, its features also make it closer to assets or commodities because its circulation cannot be directly altered like fiat currencies. Since Bitcoin is restricted to a digital platform, it can be construed as a digital asset. Furthermore, in terms of cryptocurrency, such as Bitcoin, a digital asset is created or minted when new information is added to a specific blockchain. These blockchain entries aid the users to exchange the already existing digital assets and create new digital assets as well .
The total dollar value of all the coins that have been mined is known as coin market capitalization or coin market cap. Coin market cap is important to determine the stability of an asset, and investors also use this to compare the values across cryptocurrencies .
An organization’s digital assets can be efficiently stored, organized, managed, retrieved, and distributed using a software and system solution known as DAM. Many enterprises can develop a centralized location where they can access their digital assets by using DAM functionality.
For cryptocurrency, the equivalent of digital asset management is crypto asset management. Investors can access blockchain or cryptocurrency assets through a variety of channels with the help of crypto asset management, which is often provided as a full or partial services solution. These services can be offered by crypto asset management firms directly or through a third-party service provider. These firms oversee choosing the right crypto assets for their clients’ portfolios, monitoring and assessing the performance of those assets, guiding novice investors through the crypto market, and offering all-around support as required .
The prospect of strong and heavy returns is what drives investors to invest in crypto assets. Another part of the appeal of crypto assets is the protection that blockchain technology offers. Manipulating transactions on the blockchain is highly improbable as they cannot be changed or deleted. Transactions also demand a two-factor authentication procedure wherein a public key and a private key are used to access crypto assets . The blockchain automatically updates the ledger as an investor adds more and more digital transactions.
A DAM solution consists of several steps:
Crypto asset management is a subset of DAM, which is used to ensure the security and efficient use of crypto assets via blockchain technology.
DAM benefits businesses because:
The growing importance of digital assets has increased market interest to invest and possess digital and crypto assets. Financial institutions and other organizations are reconsidering their strategic approach towards conducting business. The entire financial market is being upended by digital assets, which is changing the financial ecology. Blockchain is also gathering a lot of momentum and forcing critical aspects of businesses to get acclimatized to the changing scenario. Keeping up with the evolving digital landscape, the Indian Government has launched India’s first digital asset management platform called DigiBoxx .
Considering this rapid proliferation of digital assets, digital asset management becomes crucial to ensure that businesses can grow with the use of digital assets. This requires a strong command of the underlying technologies. These technologies have the potential to transform business models around the globe and across sectors. However, businesses must evolve their strategies cautiously considering the risks that come with digital assets, especially cryptocurrency.
Frequently Asked Questions (FAQs)
A business that utilizes digital assets, i.e., assets held digitally that add to the value of a business and are discoverable and stored in an accessible manner. A business that utilizes cryptocurrency and crypto assets is also a digital asset business.
When businesses or entities invest in digital assets, primarily via the blockchain technologies, such as cryptocurrency, NFTs, etc., it is referred to as digital asset investment.
A digital asset is part of the wider terminology that includes digital files, videos, images, etc., along with cryptocurrency, tokens, etc. utilized via blockchain technology. Cryptocurrency is a subset of digital assets.
Standardized templates are used to prepare digital files for encoding, which makes asset search easy. By using the qualities of the asset, such as type or version, the metadata aids in the identification of digital assets. Activity and workflow accountability is implemented by management with authorisations, internal review, and version controls.
Digital asset management ensures transparency in an organisation and improves collaboration between its various departments. It helps by adding value to the process of customer retention. Metadata is used to cut down on the amount of time users have to spend looking for assets, thereby making the functioning of the organisation optimum.
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 Definition of Digital Assets - Gartner Finance Glossary
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Related: Cryptocurrency Laws in India & The Challenge Of Regulatory Frameworks
Contributed by Partner, Prithiviraj Senthil and Associate, Akshay Vasantgadkar