By Jacob Fleshman, Senior Accountant at Blue & Co.
Digital currency, often called cryptocurrency or just crypto, has moved from the fringes of finance to the center of global conversation. With the U.S. government recently creating a Strategic Bitcoin Reserve and a national digital asset stockpile, these assets are now recognized as strategic holdings. This shift signals that crypto is poised to play a major role in the economy. Yet, one key question remains: How should digital currency be reported on financial statements?
Unlike traditional assets, cryptocurrencies have no intrinsic value, sovereign backing, or long-established regulatory framework. This distinction has led to years of debate among standard-setters and accountants over how to achieve the most transparent and faithful reporting.
How We Got Here
The modern crypto era began in 2008 when its creator outlined the concept of a decentralized digital currency. Bitcoin launched the following year, and by 2019, nearly one in five people worldwide owned some form of it. With that kind of adoption, governments and regulators were forced to pay attention.
Initially, there were no accounting rules that addressed crypto directly. Both the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) struggled to determine where this new kind of asset fits. Eventually, both boards treated cryptocurrencies as intangible assets under ASC 350 (U.S. GAAP) and IAS 38 (IFRS), similar to goodwill or trademarks.
Under this classification and FASB guidance, crypto holdings were tested for impairment but could not be written up in value at a later time. For example, if Bitcoin prices dropped and later rebounded, the accounting treatment recognized the loss but ignored the recovery. This caused financial statements to show crypto assets at far below their actual market value, an issue that became increasingly significant as the prices of Bitcoin and other coins soared.
The IASB took a similar stance under its own standards (IAS 38 for intangible assets and IAS 2 for inventory). While IAS 2 allowed a cost-based valuation for assets held for sale, neither approach reflected true market reality. The result was a persistent mismatch between reported book values and fair market values.
A Step Forward: Fair Value Accounting
Recognizing this problem, FASB issued Accounting Standards Update (ASU) 2023-08, which becomes mandatory for fiscal years ending in 2025 or later. The update does not remove cryptocurrencies from the ‘intangible asset’ category but does require that qualifying assets be measured at fair value, with gains and losses recognized in net income.
This is a major change. It means that crypto holdings will now rise and fall in value on the balance sheet in real time, just like marketable securities. The new rule also clarifies which digital assets qualify for fair value treatment. They must be blockchain-based, fungible, not issued by the reporting entity, and not considered securities or tangible property. Non-fungible tokens and stablecoins are excluded. ASU 2023-08 also introduces enhanced disclosure requirements, including significant holdings and restrictions, changes during the reporting period, and valuation methods used.
For accountants, this change represents a move toward more accurate, transparent, and relevant financial reporting.
The Issues That Remain
Even with ASU 2023-08, challenges persist. Some of the biggest concerns include:
- Limited coverage: The standard does not address crypto assets classified as securities, leaving gaps in guidance for new and evolving asset types.
- Volatility: Fair value measurement introduces the same market swings that crypto investors experience. For companies holding digital assets as a cash alternative, these swings could significantly impact reported earnings.
- Disclosure depth: Although disclosure requirements are improving, investors may still struggle to fully understand liquidity risks or valuation methods.
- Lack of international alignment: Crypto operates across borders, yet GAAP and IFRS continue to diverge. For multinational companies, this creates added complexity in consolidating global financial statements.
These issues highlight the challenge of fitting a revolutionary financial concept into existing accounting structures.
Ideas for the Future
Some experts argue that crypto deserves its own asset class, one that reflects its unique characteristics of decentralization, volatility, and technological innovation. Creating a dedicated reporting category could not only clarify accounting treatment but also encourage global convergence between GAAP and IFRS.
A separate classification would allow regulators to address the nuances of digital assets head-on rather than retrofitting them into traditional frameworks that were never designed for this purpose.
Other Regulatory Players
FASB and IASB are not the only authorities shaping how crypto is viewed. Two U.S. agencies, the Securities and Exchange Commission (SEC) and the Internal Revenue Service (IRS), also play key roles.
- The SEC focuses on whether a digital asset meets the definition of a security. If it does, it becomes subject to U.S. securities laws and additional disclosure requirements.
- The IRS treats cryptocurrency as property, not currency. That means it is taxed like a capital asset. Any time it’s sold, traded, or used for payment, a gain or loss must be recognized based on the change in fair market value. In 2025, new IRS rules require Form 1099-DA reporting, wallet-by-wallet cost basis, and heightened enforcement.
Together, these interpretations add layers of complexity to how digital currencies are reported and taxed, often creating inconsistencies between financial and tax reporting.
Looking Ahead
Cryptocurrency is still relatively new, yet it’s already reshaping how we think about money and reporting. For now, accounting regulators are still playing catch-up, responding to developments as they happen. Over time, the focus will likely shift from reacting to proactively shaping standards that capture the essence of digital assets.
As crypto becomes more integrated into mainstream finance, possibly even backed by governments or central banks, accounting principles will continue to evolve. The introduction of ASU 2023-08 is a meaningful step forward, but it’s far from the end of the story.
What comes next will depend on how the accounting profession chooses to balance innovation with integrity, ensuring that the future of financial reporting remains as trustworthy as the technology it seeks to represent.
Digital asset reporting is complex and rapidly changing. If you have questions or need guidance tailored to your organization, reach out to your local Blue & Co. advisor for support.
References
Fidelity Investments. (2025, July 31). How do bitcoin and other cryptocurrencies have value? Fidelity. https://www.fidelity.com/learning-center/trading-investing/how-does-bitcoin-have-value
Financial Accounting Standards Board. (2023a). ASC 350: Intangibles—Goodwill and other. FASB Accounting Standards Codification. https://asc.fasb.org
Financial Accounting Standards Board. (2023b). Accounting Standards Update No. 2023-08: Intangibles—Goodwill and other—Crypto assets (Subtopic 350-60): Accounting for and disclosure of crypto assets. FASB. https://fasb.org/page/ShowPdf?path=ASU%202023-08.pdf&title=ACCOUNTING%20STANDARDS%20UPDATE%202023-08%E2%80%94Intangibles%E2%80%94Goodwill%20and%20Other%E2%80%94Crypto%20Assets%20(Subtopic%20350-60)
Internal Revenue Service. (2025, June 20). Digital assets. U.S. Department of the Treasury. https://www.irs.gov/filing/digital-assets
International Accounting Standards Board. (2021a). International Accounting Standard 38: Intangible assets. IFRS Foundation. https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2021/issued/part-a/ias-38-intangible-assets.pdf
International Accounting Standards Board. (2021b). International Accounting Standard 2: Inventories. IFRS Foundation. https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2021/issued/part-a/ias-2-inventories.pdf
Jackson, A. B., & Luu, S. (2023). Accounting for digital assets. Australian Accounting Review, 33(3), 302–312. https://doi.org/10.1111/auar.12345
Panda, S. K., Sathya, A. R., & Das, S. (2023). Bitcoin: Beginning of the cryptocurrency era. In S. K. Panda, V. Mishra, S. P. Dash, & A. K. Pani (Eds.), Recent advances in blockchain technology (Vol. 237, pp. 17–34). Springer. https://doi.org/10.1007/978-3-031-22835-3_2
Trump, D. (2025, March 6). Establishment of the Strategic Bitcoin Reserve and United States Digital Asset Stockpile (Executive Order No. 14233). The White House. https://www.whitehouse.gov/presidential-actions/2025/03/establishment-of-the-strategic-bitcoin-reserve-and-united-states-digital-asset-stockpile/
U.S. Securities and Exchange Commission. (2019). Framework for “investment contract” analysis of digital assets. Division of Corporation Finance. https://www.sec.gov/about/divisions-offices/division-corporation-finance/framework-investment-contract-analysis-digital-assets
