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CFA Level I Exam · Introduction to Digital Assets

Types of Digital Assets for CFA Level I

Updated 7 October 2026 · Fact-checked

Digital assets are assets issued and transferred in digital form, usually on a distributed ledger. The main types are cryptocurrencies, stablecoins, security tokens, utility tokens, non-fungible tokens (NFTs) and central bank digital currencies (CBDCs). To answer a question, identify who issues the asset, what claim it gives, and whether its value is stable.

Understand Types of Digital Assets

A digital asset is anything of value that exists in digital form and can be owned and transferred, typically recorded on a distributed ledger. The exam asks you to sort digital assets into categories by what they are and what they give the holder.

Cryptocurrencies are digital currencies created and exchanged on decentralized networks without a central issuer. Bitcoin is the standard example. Their value depends on supply, demand and market confidence. They are not a claim on any firm or government.

Stablecoins try to hold a steady value by being tied to a reference asset, such as a fiat currency like the US dollar. Some are backed by reserves of cash or short-term securities. Others use algorithms or other crypto assets as collateral. Their stability depends on the quality of the backing and the issuer's ability to redeem.

Tokens are digital units issued on a platform, often representing a right. Security tokens are digital representations of ownership or a financial claim, such as equity or debt, and are generally subject to securities regulation. Utility tokens give access to a product or service on a platform, not an ownership or profit claim. Non-fungible tokens (NFTs) are unique digital tokens that represent ownership of a specific item, such as artwork or a collectible. Each one is not interchangeable with another.

Central bank digital currencies (CBDCs) are digital forms of a country's fiat currency, issued and backed by the central bank. Unlike cryptocurrencies, they are a central bank liability and are centrally controlled. Unlike stablecoins, the issuer is the central bank itself, not a private firm.

Key formulas to remember

Cryptocurrency
Decentralized issuance, no central issuer, no claim on an asset
Value comes from market supply and demand. Example: Bitcoin.
Stablecoin
Value pegged to a reference asset (often a fiat currency)
Check the backing: reserves, collateral or algorithm. Peg can break.
Security token
Token = digital claim on ownership or cash flows
Generally treated as a security and regulated as one.
Utility token
Token = access to a platform's product or service
No ownership or profit claim by design.
NFT
Unique, non-fungible token tied to a specific item
Not interchangeable one-for-one with another NFT.
CBDC
Digital fiat currency issued by a central bank
A central bank liability; centrally controlled.

How to solve Types of Digital Assets questions

Use the same short sequence for any classification question on digital assets.

  1. 1Read the stem and underline what the asset does: store value, give access, represent ownership, or serve as money.
  2. 2Ask who issues it: no central issuer, a private firm, or a central bank.
  3. 3Ask what claim the holder gets: none, a service, an ownership or cash-flow right, or a unique item.
  4. 4Ask whether the price is meant to be stable and what backs it.
  5. 5Match to the category: cryptocurrency, stablecoin, security token, utility token, NFT or CBDC.
  6. 6Eliminate the two options that contradict the issuer or the claim.
  7. 7Check the regulatory angle if asked: ownership or profit claims point to securities regulation.

Quickest way: Issuer and claim shortcut

When to use it: Use for any definition or matching question when you have about 90 seconds.

  1. Central bank issuer means CBDC. Stop.
  2. Pegged to a currency or asset means stablecoin.
  3. Unique item means NFT.
  4. Access to a service means utility token.
  5. Ownership or income claim means security token.
  6. No issuer and no claim, just a decentralized currency, means cryptocurrency.

Common mistakes in Types of Digital Assets

  • Treating a CBDC as a cryptocurrency.

    Both are digital and may use similar technology.

    Fix: Look at the issuer. A CBDC is issued by a central bank and is centrally controlled. Cryptocurrencies have no central issuer.

  • Assuming every stablecoin is fully backed and risk-free.

    The word 'stable' suggests safety.

    Fix: Stability depends on the backing and redemption ability. The peg can fail.

  • Calling a utility token an investment in the firm.

    Tokens are often sold in fundraising, so they look like shares.

    Fix: A utility token gives access to a service. An ownership or profit claim makes it a security token.

  • Thinking NFTs are interchangeable like coins.

    They trade on the same kinds of platforms.

    Fix: NFTs are non-fungible. Each represents a unique item.

  • Assuming security tokens are unregulated because they are crypto.

    Crypto is often associated with weak regulation.

    Fix: Security tokens represent financial claims and are generally subject to securities regulation.

Worked examples

Example 1

A platform issues a digital token that gives holders a share of the firm's future profits and voting rights. Which type of digital asset is it? A. Utility token B. Security token C. Stablecoin

Show the solution
  1. Underline the claim: a share of profits and voting rights.
  2. That is an ownership and cash-flow claim.
  3. A utility token gives access to a service, so A is wrong.
  4. A stablecoin is pegged to a reference asset, so C is wrong.
  5. The token is a digital representation of ownership, which is a security token.

Answer: B. Security token

Example 2

A digital unit is denominated in a country's currency, issued directly by its central bank and is a liability of that bank. Which is it most likely? A. Cryptocurrency B. Stablecoin issued by a private firm C. Central bank digital currency

Show the solution
  1. Identify the issuer: the central bank.
  2. Cryptocurrencies have no central issuer, so A is wrong.
  3. A private stablecoin is issued by a private firm, so B is wrong.
  4. A digital fiat currency that is a central bank liability is a CBDC.

Answer: C. Central bank digital currency

Exam tips

  • Most questions test the issuer and the claim. Find those two facts first.
  • Watch for stems that describe a peg and then ask which asset it is. That is a stablecoin.
  • Do not confuse access rights (utility) with ownership rights (security).
  • Three options only: eliminate the two that contradict the issuer, then pick the remaining one.
  • Stablecoin risk questions point to backing quality and redemption.

Practice questions from Introduction to Digital Assets

Types of Digital Assets in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Types of Digital Assets: frequently asked questions

What is the difference between a cryptocurrency and a stablecoin?

A cryptocurrency has no central issuer and its price moves with market supply and demand. A stablecoin aims to hold a steady value by being pegged to a reference asset, such as a fiat currency. Its stability depends on its backing.

What is the difference between a security token and a utility token?

A security token represents an ownership or financial claim, such as equity or debt, and is generally regulated as a security. A utility token gives access to a product or service on a platform. It does not give an ownership or profit claim.

What is a CBDC?

A central bank digital currency is a digital form of a country's fiat currency. It is issued by the central bank and is that bank's liability. It is centrally controlled, unlike cryptocurrencies.

What makes an NFT different from other tokens?

An NFT is non-fungible, meaning it is unique and not interchangeable with another token. It typically represents ownership of a specific item, such as a piece of digital art or a collectible.