The rapid growth of digital assets has created significant accounting and reporting challenges. How a company holds or uses these assets, whether for long-term investment, day-to-day operations, or trading directly affects their classification, measurement, and disclosure in financial statements. Recent guidance from standard setters, particularly under U.S. GAAP, along with ongoing developments under IFRS, means that entities must exercise professional judgment in selecting the most appropriate accounting treatment based on their specific facts and circumstances.

Recent Standards Updates

Under U.S. GAAP, the FASB issued ASU 2023-08: Accounting for and Disclosure of Crypto Assets (Subtopic 350-60) in December 2023. This guidance applies to crypto assets that meet specific scope criteria: they must be fungible, reside on a distributed ledger, meet the intangible asset definition, and not provide enforceable rights to underlying goods, services, or other assets. For assets that meet these criteria, subsequent measurement is at fair value with changes recognized in net income each period. Presentation must separate these assets from other intangible assets, and enhanced disclosures are required. The effective date is for fiscal years beginning after December 15, 2024, including interim periods, with early adoption permitted.

In contrast, IFRS does not yet have a dedicated standard for crypto assets or stablecoins. Entities instead apply existing IFRS standards such as IAS 38 (Intangible Assets) and IAS 2 (Inventories), depending on use. The IASB continues research and has issued staff papers on digital assets, indicating that accounting for these assets remains under review. Consequently, IFRS accounting is highly fact-specific and relies heavily on judgment.

Cryptocurrencies Held for Long-Term Investment

When digital assets such as Bitcoin or Ethereum are held for long-term investment and do not provide contractual rights to receive cash, the recommended approach under IFRS is generally to classify them as intangible assets under IAS 38. If IAS 2 applies (for certain trading or broker-dealer situations), different rules may follow. Under IAS 38, entities can apply the cost model, where assets are initially recognized at cost and subsequently measured at cost less impairment losses, with no amortization if the asset has an indefinite useful life. Alternatively, if an active market exists, the revaluation model can be used, where increases in value are recognized in Other Comprehensive Income as a revaluation surplus (unless offsetting prior decreases recorded in profit or loss) and decreases are recorded in profit or loss or OCI to the extent of prior surplus.

Under U.S. GAAP, digital assets that meet ASC 350-60 scope criteria are measured at fair value with changes recognized in net income each period, meaning unrealized gains or losses affect profit or loss. In practice, IFRS favors a cost/impairment approach, while U.S. GAAP leans toward fair value for long-term investment holdings, assuming the asset meets the scope requirements.

Stablecoins Used for Day-to-Day Operations

Stablecoins, such as USDT and USDC, are digital assets designed to maintain a stable value pegged to a fiat currency like the U.S. dollar. Because of this stability, many companies consider using them for operational purposes, including payroll, supplier payments, or treasury management. Despite this apparent similarity to cash, stablecoins are not legal tender, and holders generally lack unconditional enforceable rights to redeem them for fiat currency. This distinction has important implications under accounting standards. Specifically, under IFRS, cash and cash equivalents are defined in IAS 7 as cash on hand, demand deposits, or short-term, highly liquid investments that are readily convertible to known amounts of cash and subject to an insignificant risk of change in value. Stablecoins fail these criteria because of counterparty, redemption, and liquidity risks, meaning they cannot be classified as cash or cash equivalents even when used for day-to-day operations.

In the absence of enforceable rights or guaranteed convertibility, IFRS guidance points towards accounting for stablecoins as intangible assets under IAS 38. IAS 38 defines intangible assets as identifiable non-monetary assets without physical substance that are controlled by the entity and expected to provide future economic benefits. Under this standard, stablecoins are recognized as assets on the balance sheet, typically measured at cost less any accumulated impairment losses, or in certain cases, revalued if an active market exists and the revaluation model is applied. When these stablecoins are used for payments, they should be derecognized at fair value or another reliable measurement on the transaction date, with any resulting gain or loss recorded in profit or loss. Because stablecoins are generally low-volatility instruments, practical accounting often includes simplifications such as using daily average rates or batching multiple transactions, provided that price fluctuations are immaterial. This approach balances compliance with IFRS principles against operational practicality.

Beyond IAS 38, there are scenarios where stablecoins could theoretically be classified as financial assets under IFRS 9, but only if they grant the holder enforceable contractual rights to receive cash or another financial asset from the issuer. IFRS 9 defines financial assets as either cash, an equity instrument of another entity, or a contractual right to receive cash or another financial asset. Most retail stablecoin holdings do not meet this definition because redemption is conditional on the issuer’s solvency and specific contractual terms. In the rare instance where enforceable redemption rights exist, the stablecoin would be measured at fair value through profit or loss (FVTPL), with changes recognized in net income.

Key disclosures under IAS 1 are essential for transparency. Companies should provide information on the nature of the asset, its measurement basis, and the risks involved, including liquidity risk, redemption risk, and issuer credit risk. IFRS emphasizes that disclosures should provide users of financial statements with sufficient information to understand the effects of these assets on the company’s financial position and performance.

Under U.S. GAAP, the approach is broadly similar. Stablecoins that fall within the scope of ASC 350-60 (Intangibles—Goodwill and Other—Crypto Assets) are measured at fair value with changes recognized in net income, with separate presentation from other intangible assets and enhanced disclosure requirements. If the stablecoin carries enforceable redemption rights, other U.S. GAAP guidance, such as financial instruments, may apply.

Cryptocurrencies Held for Trading Purposes

For cryptocurrencies held by crypto exchange houses for trading purposes, IFRS treatment depends on the entity’s business model. IAS 2 provides a specific exception for commodity broker-traders, allowing inventories held by broker-traders to be measured at fair value less costs to sell, with changes recognized in profit or loss as they occur. A broker-trader is defined as an entity that buys or sells commodities for others or on its own account, with inventories acquired primarily for sale in the near future and to generate profit from price fluctuations. Inventories are generally assets held for sale in the ordinary course of business. Applying these principles, a crypto exchange house that trades cryptocurrencies on its own account for short-term profits can analogize its crypto holdings to broker-trader inventories. In this case, the crypto is measured at fair value less costs to sell, and any gains or losses from price fluctuations are recognized directly in profit or loss, reflecting the trading intent and market volatility. Cryptocurrencies held on behalf of clients, however, remain off-balance-sheet, as the exchange does not control them. For entities that do not meet the broker-trader criteria, crypto holdings would typically be accounted for under IAS 38 as intangible assets, measured at cost less impairment or revalued if an active market exists. This treatment ensures the accounting reflects both the business model and the economic substance of the crypto holdings.

Final Considerations

Given the evolving nature of guidance such as IASB research projects on digital assets and intangible assets, entities should treat accounting for digital assets as judgment-rich. The approaches described above represent current best practices based on available standards and official guidance, not definitive rules. Companies should document their assessment of enforceable rights, business models, liquidity and issuer risks, likely classification, measurement basis, and disclosures. They should also monitor standard-setting developments, maintain internal controls around valuation and fair value estimation, and provide transparent disclosures regarding holdings, measurement bases, and associated risks.