3 Accounting Tips for Cryptocurrency and Digital Assets

Since recent years, there has been a significant rise in the number of people who started investing in cryptocurrency. Along with that, the total percentage of people holding digital assets is also on the rise. It is indeed true to state cryptocurrency as a kind of digital currency organized on cryptography. Crypto coins utilize cryptography for safety purposes, which makes it hard to forge.

It is possible to purchase and sell cryptocurrencies similar to any other property. In addition to that, it is essential to have a digital wallet (offline or online) in order to store them. Price fluctuations of crypto coins are relatively common. They can be utilized across international borders for buying products and services from sellers that accept crypto payments.

Accounting for Cryptocurrency And Digital Assets


In the initial times, accounting for cryptocurrency and digital assets can appear frightening. It is because of the fact that they are intangible assets. However, we glance at a few approaches about crypto and digital assets that the USA has settled to handle for guidance. For instance, Bitcoins, including other altcoins along with digital assets, are evaluated as property on federal tax bases.

Here are some tax deliberations and accounting laws that relate to the equity that apply to them:

• Cryptocurrency is not considered a currency for the purposes of calculating losses and profits under tax regulations.
• When digital assets are utilized to pay for various types of goods or services, all taxpayers have to incorporate the decent market value of those assets as taxable revenue.
• The decent market value is calculated as of the acquisition date. In essence, it is swapped for US dollars for tax reasons as an accounting treatment.
• A taxpayer can get an actual loss or gain from a tax standpoint. For example, if they acquired Bitcoins when they were at their peak price, they might need to handle a loss.
• Accounting services only have to remember that when taking cryptocurrency as revenue for regulatory submission. In addition to that, they must adopt a valuation approach and decrease company costs during the year to avoid major accounting and tax concerns.

The crucial accounting practice for digital assets is listing the value of the crypto coins while acquiring and using them. You can precisely evaluate profits and losses on your financial accounts in this manner. Handling digital assets may be difficult and contentious, particularly when they are not controlled by central banks.

It will take time to build rules and regulations that are compatible with crypto assets and digital currency. You do not have to be concerned about the accounting and tax implications of crypto and digital assets if you use the correct tools and follow suitable practices.

Cryptocurrencies are decentralized and non-regulated coins. Besides that, there would be no fees for transactions from third parties. There are some disadvantages of crypto coins and digital assets as well, such as:

• There’s a chance of losing money if a hacker gets into your account or if an exchange closes down.
• Avoidance of government financial monitoring for tax evasion (albeit this has yet to be proven).
• If crypto coins are used in connection with illicit activity, they are subject to depreciation or seizure.

Top 3 Accounting Tips For Cryptocurrency and Digital Assets


Here, we have listed some of the beneficial accounting tips associated with cryptocurrency and digital investments. Make sure to check out here to read more about cryptocurrency and other digital assets.

1. Pacts encompassing crypto assets that may include derivatives

Entities could sign a pact granting them the right to obtain a specific amount of cryptocurrency and assets through a wide range of transactions. For instance, a few people might decide to pay you five bitcoins in two weeks for a service you perform for them.

According to the practice aid, accounting for the privilege to acquire cryptocurrency and digital assets often entails determining whether secondary accounting under FASB Accounting Standards Codification applies or not. An entity evaluates whether secondary accounting is needed and whether the privilege to collect the crypto assets has an entrenched derivative that has to be bifurcated and accounted for individually.

2. Obtaining and lending the crypto assets


Entities frequently rent and give crypto assets, and it is crucial to report the asymmetry in its accounting. It is vital to attend to different accounting criteria for each as there is a lack of harmony between the gaining and providing side of crypto accounting.

Entities that provide cryptocurrency and digital assets have to understand about the accounting under FASB ASC. A primary aspect of accounting for crypto lending is the matter of the authority of those investments. As they are nonfinancial assets, it is necessary to speculate about the valid ownership and total control over them while giving crypto coins to others.

3. Crypto asset mining actions

The practice guide goes over how to account for two different revenue streams associated with cryptocurrency mining on proof-of-work blockchain networks. When a cryptocoin and digital asset mining company completes a transaction on the blockchain, it may be rewarded with fees (transaction fees) from the parties that wished the transactions.

Along with that, a block reward from the blockchain network for finishing the verification task. When a miner is promptly involved in mining actions and if a miner mines via membership in a mining pool that is administered by a mining pool operator, the practice assistance explains the accounting implications. The fundamental accounting issue to consider in each situation is whether the miner has a revenue contract or not.

Bottom Line

In the present scenario, there is no Accounting Standard (AS) or Ind AS which can specify how crypto coins have to be acknowledged, calculated, and illustrated in Financial Statements. Because of that, the one choice accessible for us is to cite the current criteria to handle the accounting of cryptocurrency and digital assets.

About Carolyn Lang