Challenges With Accounting For Cryptocurrency

Date Published: 12/15/2021
Published By: Centri Consulting
Topic: Insights

A man stands in front of a gold maze.

The cryptocurrency industry is new and ever-changing. While its youth makes it an appealing endeavor for many businesspeople, it can also cause complications when it comes to accounting and reporting in the relatively uncharted waters of digital currency.

Today we’re looking at the implications of accounting for cryptocurrency, as well as the benefits of choosing an outsourced accounting solution to manage these unique, intangible assets.

What is Cryptocurrency?

Cryptocurrency is unlike any other financial asset. It isn’t legal tender (like a dollar bill), and while it represents value (like a check or credit card), it is highly volatile and prone to short-term fluctuation.

Bitcoin, the first decentralized cryptocurrency on the market, was established in 2009. Its starting value was just fractions of a penny, but since its inception, it has made early investors (and businesses) millions of dollars. It’s no surprise that businesses are eager to get this asset on their balance sheet (or create a cryptocurrency of their own), but there are a number of complications to explore before doing so.

Furthermore, in addition to the names you probably recognize (like Bitcoin and Ethereum), there are over 1,500 different cryptocurrencies on the market, each with its own intricacies. The less common the coin, the less documentation and information on how it operates and how to manage it financially, leaving many businesses with lingering questions about appropriate accounting and financial reporting.

Is Cryptocurrency an Asset or Currency?

From an accounting standpoint, cryptocurrency is considered an intangible asset. However, this designation isn’t entirely accurate, which creates further complications when it comes to financial reporting.

How Businesses Use Cryptocurrency

There are a number of reasons why digital currency may appear on your company’s balance sheet and spark questions about the finer details of accounting for cryptocurrency. The three most common reasons are mining, purchase and investment, and payment.


While the future of any cryptocurrency’s value is unknown, early investment in mining has already paid off big for a number of businesses. With a mining rig, a few pieces of software, and a digital wallet to store your tokens and coins, you can create a new stream of potential income for your business.

Purchase & Investment

For companies that are interested in cryptocurrency but don’t have the time or resources to mine it themselves, direct purchase for investment is another option. Since the value of cryptocurrency is extremely volatile, buying and selling can be a valid and profitable business endeavor.


Some businesses have also started accepting cryptocurrency as a form of payment. While it may seem limited to industry leaders, an increasing number of small businesses have started accepting common cryptocurrencies thanks to digital payment services like PayPal or BitPay.

However, it’s important to note that constant transactions via cryptocurrency may cause more complications on your balance sheet than a few crypto-asset purchases or sales a month. You’ll need to have the proper functions in place for accounting for cryptocurrency before accepting it as standard payment.

Cryptocurrency is also a bank-free payment method, making it a unique opportunity for businesses with sensitive banking regulations, like cannabis growers and dispensaries.

A man checks crypto fluctuations on his phone.

Challenges with Accounting for Cryptocurrency

While cryptocurrency can present a number of financial opportunities for your business, it also can create difficulties with accounting and financial reporting.

Limited FASB Guidance

Because cryptocurrency is relatively new, there are no guidelines in place for how it should be handled under generally accepted accounting principles (GAAP). Instead, businesses must treat it as an intangible asset on their balance sheet, which causes a number of issues in communicating its actual value.

As crypto has gained popularity (and value) over the past few years, governments, businesses, and individuals have urged the Financial Accounting Standards Board (FASB) to take action. While the FASB launched an agenda consultation requesting feedback from the public on cryptocurrency and other modern financial issues, no further action has been taken as of October 2021.

Difficulties on the Balance Sheet

Because cryptocurrency is treated financially as an intangible asset, it is recorded and valued differently from cash and other investments. But, while it is grouped with other assets like copyrights, patents, and trademarks, it does not amortize in the same way.

Crypto assets are tested for impairment annually, with many companies opting to test more often. However, due to constant fluctuations in value, the worth of a cryptocurrency portfolio can be wildly inaccurate, depending on the date of testing.

Furthermore, while losses must be accounted for, gains cannot be recorded since the traditional model for intangible assets does not accommodate increases in value. This means your assets may be misrepresented any time the market improves significantly.

Accurate value cannot be communicated accurately until the date of sale, causing one of the most significant issues with accounting for cryptocurrency. Not until the time of sale is any realized gain recorded or earnings reflected.

Difficulties With Investor Transparency

Not being able to convey the value of your company’s cryptocurrency assets can also make finding and retaining investors difficult. Your portfolio may be strong but you can’t prove it to an investor until you sell.

You’ll need an accountant who is well-versed in the ever-changing value of cryptocurrency to reconcile differences throughout the transaction process, from your wallet through the blockchain and into your general ledger.

Future Legal Issues

The anonymity of buying cryptocurrency means that it’s difficult to track and regulate. And, since it is new to the market, there are very few rules and regulations in place from a legal perspective when it comes to accounting for cryptocurrency. An outsourced accountant can ensure that as far as your operations go, everything from acquisition to reporting is done by the book.

The Benefits of Outsourced Accounting for Cryptocurrency

While accounting in-house may seem like the simplest solution, there are a number of unique benefits to outsourcing accounting for cryptocurrency.

Gain Access to Crypto Experts

If you’re new to crypto, outsourcing can provide you access to experts who manage and handle cryptocurrency daily. Whether you’re an up-and-coming crypto company or are just looking to diversify your assets, our team can help you build your presence in the industry and avoid beginner mistakes.

Expand Your Investment Portfolio

If you’ve been wanting to invest in cryptocurrency but aren’t sure how it will impact your accounting, outsourcing can help you take the leap. With a team of expert accountants, you’ll be able to establish good financial habits from day one, simplifying your accounting and financial reporting tasks.

Get Accurate, Real-Time Data

Powered by Centri uses a powerful suite of innovative, user-friendly software that allows you to view your full portfolio in near-real-time. Never again will your decision-making be held up by waiting on statements or documentation. Your data will be available anytime you need it to make more educated decisions for your business.

Interested in how an outsourced accounting solution can simplify managing your cryptocurrency assets? Contact us to get started with a free consultation on accounting for cryptocurrency.