How Accountants Should Handle Crypto in Client Accounts

Step 1: Establish What the Client Actually Holds

The first task is understanding the nature and extent of the client's digital asset holdings. Clients may hold cryptocurrencies (Bitcoin, Ethereum), stablecoins (USDC, USDT), NFTs, utility tokens, DeFi positions, or tokenised assets. Each has a different risk profile, accounting treatment, and tax implication. Obtain a complete inventory: wallet addresses, exchange account statements, and transaction histories. Be alert to staking rewards and DeFi yields that can accrue without active management.

Step 2: Apply the Correct Accounting Classification

Under IFRS, cryptocurrency is most commonly treated as an intangible asset under IAS 38 — the position confirmed by the IASB's 2019 agenda decision, with June 2024 amendments allowing fair value measurement for qualifying cryptocurrencies with active markets. Under UK GAAP (FRS 102), Section 18 applies for most holdings, Section 13 (inventories) for trading entities. There is no dedicated IFRS or UK GAAP standard for cryptocurrency — professional judgment and clear documentation are essential.

Step 3: Establish a Valuation Approach

For reporting purposes: establish the reporting date fair value using a reliable, consistent source (major exchange closing price at midnight UTC on the balance sheet date); apply impairment testing under the cost model if values have fallen below carrying amount; maintain consistent treatment period to period. For high-volume trading clients, consider specialist crypto accounting software (Koinly, CoinTracking, Cryptio) that pulls transaction data and produces audit-ready reports.

Step 4: Meet Record-Keeping Obligations

HMRC and Revenue (Ireland) treat each cryptocurrency transaction — including crypto-to-crypto swaps, staking rewards, and payments in crypto — as a potential taxable event. Records should include: date and time of each acquisition and disposal, amount and type of asset, consideration in sterling or euros at transaction time, and wallet addresses and exchange identifiers. Inadequate records result in HMRC estimating gains — often unfavourably.

Step 5: Disclosure in Financial Statements

Material digital asset holdings must be disclosed. Best practice includes: a separate line item or note describing the nature and carrying amount, disclosure of the accounting policy applied (cost model vs revaluation, pricing source), disclosure of significant assumptions, fair value disclosure where the cost model is used and fair value differs materially, and impairment charges recognised in the period.

When to Escalate to a Specialist

Consider escalating when: the client has DeFi activity (lending, staking, liquidity provision) — tax and accounting treatment is genuinely contested; the client received crypto as income (mining, airdrops, hard forks) — classification requires careful analysis; holdings are material and the client lacks adequate records; AML red flags are present; the client operates a crypto business requiring FCA registration.

Frequently Asked Questions

Is cryptocurrency an intangible asset under IFRS?

In most cases, yes. The IASB's 2019 agenda decision confirmed that cryptocurrencies are typically accounted for under IAS 38 as intangible assets, or under IAS 2 if held for sale in the ordinary course of business. June 2024 amendments allow fair value measurement for qualifying cryptocurrencies.

Do accountants have to report crypto to HMRC?

HMRC can require accountants to report client crypto holdings under certain circumstances, and clients must declare crypto gains on their self-assessment returns. Accountants have professional obligations to ensure clients meet their reporting requirements.

What is the best pricing source for crypto at year end?

There is no single mandated source. The key requirements are consistency, reliability, and documentation. Common approaches include the closing price on a major regulated exchange at midnight UTC on the balance sheet date.

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