As cryptocurrency adoption accelerates across industries and investment portfolios, the accounting profession faces the complex task of properly recognizing, measuring, and disclosing digital assets. With no globally harmonized standard for crypto accounting, firms must navigate a fragmented landscape of interpretations, risking inconsistencies in financial reporting. This article critically evaluates the current state of cryptocurrency accounting, reviews regulatory proposals, and analyzes the implications for auditors, investors, and standard-setting bodies.
Accounting Classification: Asset or Currency?
One of the first questions accountants must resolve is how to classify cryptocurrencies. The IASB and FASB agree that cryptocurrencies are not cash or cash equivalents, nor do they meet the definition of financial instruments under IFRS 9 or ASC 825. Under IAS 38 (Intangible Assets), cryptocurrencies are typically treated as intangible assets with indefinite lives, unless held for sale in the ordinary course of business (then they fall under IAS 2 Inventories).
This classification results in volatility being underreported, as gains are only recognized upon disposal—unlike fair value changes recognized under other standards. The FASB recently proposed requiring fair value accounting for crypto assets, marking a significant shift toward better matching economic reality.
Quantitative Landscape: Market Size and Corporate Holdings
As of early 2024, the total cryptocurrency market capitalization exceeds $2.5 trillion, with Bitcoin and Ethereum comprising over 60% of this value. The following table lists notable companies holding crypto assets as part of their corporate treasury:
| Company | Crypto Holdings (USD) | Reporting Standard | Classification |
|---|---|---|---|
| MicroStrategy | $4.8 billion | US GAAP | Intangible Asset |
| Tesla | $870 million | US GAAP | Intangible Asset |
| Square (Block Inc.) | $220 million | US GAAP | Intangible Asset |
Despite significant exposure to market volatility, impairment losses are recorded during price declines, while gains are only recorded upon sale, leading to asymmetric reporting that can distort financial statements.
Audit and Valuation Concerns
Auditing crypto assets poses novel challenges, including ownership verification, valuation reliability, and custody risks. Unlike traditional assets, crypto is stored in digital wallets, and private keys are essential to proving control. Auditors must rely on blockchain forensic tools, third-party confirmations, and real-time pricing indices to validate assertions.
ISA 500 (Audit Evidence) and PCAOB standards emphasize the need for sufficient appropriate evidence. However, crypto asset pricing is often volatile and fragmented across exchanges. This increases the complexity of fair value determination, especially for illiquid tokens or NFTs.
Regulatory and Standard-Setting Developments
In 2023, the FASB voted to require companies to measure crypto assets at fair value through net income, starting in 2025. The change applies to fungible assets held on public blockchains, excluding NFTs and stablecoins. The IASB, however, has yet to finalize its position, with IFRIC guidance still favoring IAS 38 treatment.
Meanwhile, the SEC has issued Staff Accounting Bulletin No. 121 (SAB 121), requiring entities that safeguard crypto for others to recognize both an asset and a liability on the balance sheet, reflecting their custodial obligations.
Case Study: Coinbase’s Reporting Practices
Coinbase Global Inc., one of the largest cryptocurrency exchanges, provides a transparent example of crypto accounting under US GAAP. Its 2023 10-K filing reports digital assets under “intangible assets,” subject to impairment testing. Coinbase also discloses detailed risk factors, including custodial arrangements, price volatility, and regulatory uncertainty.
Interestingly, the company uses third-party pricing services to estimate the fair value of its holdings, yet these values are not used for financial reporting under current GAAP. If FASB’s new fair value rule is adopted, Coinbase’s future earnings could experience significantly greater volatility.
New Paradigms for a Digital Asset Economy
Cryptocurrency accounting remains one of the most dynamic and unresolved areas of financial reporting. The push toward fair value accounting reflects growing demand for transparency and comparability, but also brings greater income statement volatility and audit complexity.
As crypto assets continue to evolve—from store-of-value instruments to platforms for smart contracts and decentralized finance—accounting standards must adapt to reflect their economic substance. The next frontier will require not just updated valuation models, but also broader rethinking of how financial reporting captures digital innovation.