Crypto Accounting Rules: Reporting Digital Assets

Crypto accounting rules under U.S. generally accepted accounting principles now require qualifying crypto assets to be measured at fair value each reporting period, with fair value changes recognized in net income. The rules matter to public and private companies, not-for-profit entities, investment companies and accounting teams that hold digital assets and prepare financial statements.

Key Takeaways

• The Financial Accounting Standards Board's ASU 2023-08, issued on December 13, 2023, requires certain crypto assets to be measured at fair value rather than under the traditional indefinite-lived intangible asset impairment model.

• Changes in fair value are recognized directly in net income for each reporting period, allowing both unrealized gains and unrealized losses to affect earnings.

• ASU 2023-08 applies for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years; early adoption was permitted.

• Companies must disclose the name, cost basis, fair value and number of units for each significant crypto asset holding and state the method used to determine cost basis.

• Non-fungible tokens are outside ASU 2023-08 because the standard requires an in-scope digital asset to be fungible.

How Do Crypto Accounting Rules Work Under U.S. GAAP?

FASB Accounting Standards Codification Subtopic 350-60 applies when a digital asset meets specified criteria: it must meet the definition of an intangible asset, reside on a blockchain or similar distributed ledger, be secured through cryptography, be fungible, provide no enforceable rights to underlying goods, services or other assets, and not be issued by the reporting entity or a related party.

Qualifying crypto assets therefore remain classified as intangible assets under GAAP, but their subsequent accounting treatment differs from other intangible assets. Under the previous accounting model, many crypto asset holdings were indefinite-lived intangible assets subject to impairment, while increases in value generally could not be recognized before disposal. ASU 2023-08 replaces that approach with a fair value model for assets within its scope.

Fair Value Measurement and Financial Statements

Fair value accounting generally reflects the price obtainable in the principal market—or, when no principal market exists, the most advantageous market—under the broader FASB fair value measurement framework.

For crypto asset holdings, this means a reporting entity remeasures qualifying assets at every balance sheet date. An increase in fair market value can generate an unrealized gain, while a decline can generate an unrealized loss, with both affecting net income rather than other comprehensive income. This can make reported earnings more sensitive to digital currency price movements even when the same asset has not been sold.

Determining fair value can be more complex when active markets do not exist for less-liquid assets. ASU 2023-08 does not exclude a crypto asset merely because an active market is absent; valuation methods must instead follow applicable fair value guidance.

Disclosure Requirements for Crypto Asset Holdings

Enhanced disclosure requirements apply to both annual and interim periods. Each significant crypto asset must be disclosed with its name, number of units, cost basis and fair value, while holdings that are not individually significant are disclosed in aggregate.

FASB does not prescribe a fixed 10% threshold for determining a significant crypto asset. Significance is assessed based on the fair value of the individual crypto asset holding rather than a universal percentage test.

Annual financial reporting additionally requires a roll-forward showing additions, dispositions, gains and losses, along with the method used for determining cost basis. Contractual sale restrictions also require separate disclosure.

Accurate reporting therefore depends on strong internal controls, transaction-level records and subledger reconciliation across wallets, custodians and crypto exchanges. These controls help reconcile acquisition costs, transfers and disposals with the general ledger and the company's profit and loss statement.

Which Digital Assets Are Outside the Fair Value Model?

ASU 2023-08 does not apply to every financial asset or other digital asset. Non-fungible tokens are excluded because they are not fungible. Tokens providing enforceable rights to underlying goods, services or other assets can also fall outside the standard, as can assets issued by the reporting entity or related parties.

Equity securities, cash equivalents and other financial instruments remain subject to their applicable accounting principles rather than automatically becoming crypto assets under Subtopic 350-60.

Initial recognition, initial measurement and derecognition are also determined under other existing guidance rather than ASU 2023-08 itself.

Crypto Accounting and Tax Implications

Book accounting and tax accounting are separate. The Internal Revenue Service's digital asset guidance generally treats digital assets as property for U.S. federal income tax purposes.

A digital asset held for investment may be a capital asset, with capital gain or loss calculated using adjusted basis and the amount realized on disposal. Consequently, fair value changes recognized for financial reporting may not produce an equivalent current tax event.

Differences between financial-statement carrying values and tax basis can therefore create deferred tax assets or liabilities depending on the circumstances.

How Gate Can Help

Companies reconciling transactions from trading venues need complete transaction histories, timestamps, quantities and execution prices before applying an accounting model. Activity on Gate Spot, for example, can form part of the transaction-level records used in a crypto subledger, but exchange records should still be reconciled with wallets, custody accounts and the entity's own general ledger before financial statements are prepared.

Conclusion

Crypto accounting rules under U.S. GAAP changed substantially with ASU 2023-08. Qualifying crypto assets remain intangible assets but are now measured at fair value each reporting period, with unrealized gains and losses flowing through net income.

The accounting standard also introduces enhanced disclosures for significant holdings, cost basis, contractual sale restrictions and annual activity, making consistent valuation methods and subledger reconciliation increasingly important.

FAQ

When did FASB's crypto fair value accounting rules take effect?

ASU 2023-08 applies to fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption was permitted.

Are cryptocurrencies still intangible assets under GAAP?

Yes. Qualifying crypto assets remain within the intangible-assets framework, but ASU 2023-08 requires subsequent measurement at fair value instead of the traditional impairment-only model.

Are NFTs covered by ASU 2023-08?

No. Non-fungible tokens are excluded because fungibility is one of the scope criteria for the FASB crypto asset accounting model.

Does FASB require disclosure when one crypto holding exceeds 10%?

No fixed 10% threshold appears in ASU 2023-08. FASB requires disclosure of each significant holding, with significance assessed based on the fair value of the individual crypto asset holding.

Did the SEC change its crypto custody accounting guidance?

Yes. The Securities and Exchange Commission's SAB 122, issued January 23, 2025 and effective January 30, 2025, rescinded SAB 121's accounting guidance for obligations to safeguard crypto assets held for platform users.