Digital Finance Reference
Digital Finance Glossary
The terminology bridging traditional financial markets with blockchain technology, digital assets, and institutional adoption.
20 termsUpdated: June 21, 2026
A
- AML
- Anti-Money Laundering. A set of laws, regulations, and procedures requiring financial institutions to detect and report suspicious transactions that might involve proceeds from criminal activity. Crypto exchanges and custodians must comply with AML rules in most jurisdictions.
- Asset Tokenization
- The process of representing ownership of a real-world asset such as real estate, bonds, or commodities as a digital token on a blockchain. Tokenization enables fractional ownership, 24/7 trading, and programmable settlement.
C
- CBDC
- Central Bank Digital Currency. A digital form of a country’s fiat currency issued and controlled by its central bank. CBDCs run on government-controlled ledgers and differ fundamentally from decentralized cryptocurrencies.
- Collateral
- Assets pledged to secure a loan or position. In DeFi, collateral is typically locked in a smart contract and liquidated automatically if its value falls below a required threshold. Over-collateralization is common practice to manage price volatility risk.
- Custody
- The safekeeping of digital assets by a qualified third party on behalf of a client. Institutional-grade custodians hold private keys in cold storage and provide insurance, audit trails, and regulatory compliance.
D
- Digital Asset
- Any value-bearing asset that exists in digital form and is represented on a blockchain. The category includes cryptocurrencies, stablecoins, tokenized securities, NFTs, and central bank digital currencies.
E
- ETF
- Exchange-Traded Fund. A fund that tracks an index or asset and trades on a stock exchange. Spot Bitcoin ETFs allow traditional investors to gain crypto exposure through regulated brokerage accounts without holding keys.
F
- FinTech
- Financial Technology. Companies and products that use technology to improve or disrupt financial services including payments, lending, insurance, and investment. FinTech spans both traditional software solutions and blockchain-native applications.
I
- Institutional Investor
- An organization such as a hedge fund, pension fund, endowment, or asset manager that invests large pools of capital in financial markets. Institutional adoption of crypto is tracked closely as a signal of market maturity.
K
- KYC
- Know Your Customer. Identity verification procedures required by regulation to confirm a customer’s identity before they can access financial services. Crypto exchanges use KYC to comply with anti-money laundering laws and prevent fraud.
L
- Liquidity
- The ease with which an asset can be bought or sold without significantly affecting its price. High liquidity means tight bid-ask spreads and large trade sizes can be executed without slippage.
M
- Market Maker
- A firm or protocol that continuously quotes buy and sell prices to provide liquidity in a market. Market makers profit from the bid-ask spread and bear inventory risk in exchange for transaction fee rebates or incentive rewards.
P
- Prime Brokerage
- A bundled set of services offered to institutional clients including securities lending, leverage, custody, clearing, and reporting. Crypto prime brokers are emerging to serve hedge funds trading digital assets.
R
- RegTech
- Regulatory Technology. Software that automates compliance processes such as KYC, AML screening, reporting, and audit trails. RegTech is growing rapidly as crypto regulation becomes more complex globally.
- RWA
- Real-World Assets. Physical or traditional financial assets such as bonds, real estate, or commodities that have been tokenized and brought on-chain. RWA tokenization is one of the fastest-growing sectors in DeFi.
S
- Settlement
- The final exchange of assets between counterparties completing a transaction. Blockchain settlement is near-instant and final by default, whereas traditional securities settlement typically takes T+1 or T+2 business days.
- Stablecoin
- A cryptocurrency pegged to a stable external reference such as the US dollar. Stablecoins serve as a medium of exchange in DeFi and crypto trading without exposing holders to price volatility. They come in fiat-backed, crypto-backed, and algorithmic varieties.
T
- TradFi
- Traditional Finance. The legacy financial system consisting of banks, brokerages, exchanges, and custodians operating under established regulatory frameworks. TradFi is increasingly integrating with crypto infrastructure through tokenization and digital asset services.
- Treasury
- A company’s pool of capital or a protocol’s reserves held to fund operations, pay expenses, and manage risk. On-chain treasuries held by DAOs are publicly visible and governed by token-holder votes.
Y
- Yield
- The return generated on an investment over a period of time, expressed as a percentage of the principal. In DeFi, yield is earned through lending, liquidity provision, and staking, and can fluctuate rapidly based on market demand.
Last updated: June 21, 2026