How Should Accountants Handle Crypto in Client Accounts?

Introduction

If a client tells you they hold Bitcoin, Ethereum, or another digital asset, you need to know exactly what to do. Crypto in client accounts is no longer a niche scenario — it is increasingly common across SMEs, sole traders, and even larger corporates. As their accountant, you carry specific record-keeping, valuation, and disclosure obligations that you cannot afford to overlook.

This guide walks you through the key steps to handle crypto in client accounts professionally and in line with current regulatory expectations.

Step 1: Identify and Classify the Digital Asset

Before you can record anything, you need to understand what the client actually holds. Digital assets are not all treated the same way. The main categories you will encounter are:

• Cryptocurrencies (e.g. Bitcoin, Ether) — most commonly treated as intangible assets under IFRS or FRS 102
• Security tokens — may have characteristics of financial instruments
• Utility tokens — often treated as prepayments depending on their purpose
• Stablecoins — may be treated as cash equivalents or financial assets, depending on structure

Ask your client for a full inventory: what they hold, on which platforms or wallets, when they acquired it, and what they paid. This is your starting point for everything that follows.

Step 2: Establish the Accounting Treatment

There is currently no dedicated IFRS standard for digital assets. The IASB issued agenda decisions in June 2019 (updated 2023) clarifying that most cryptocurrencies should be accounted for under IAS 38 (Intangible Assets) — unless the entity holds them as a broker-trader, in which case IAS 2 (Inventories) may apply.

Under IAS 38, assets are initially recognised at cost. You then have a choice of model:

• Cost model: Asset carried at cost less accumulated impairment. You test for impairment whenever the market price falls below carrying value — with crypto volatility, this is extremely common.
• Revaluation model: Only available if an active market exists (which arguably does exist for major cryptocurrencies). Assets are carried at fair value at the revaluation date, with gains going to Other Comprehensive Income (OCI), not P&L.

Under FRS 102 (UK GAAP), the position is similar. Most practitioners treat crypto as an intangible asset at cost less impairment. FRS 102 does not permit the revaluation model for intangibles unless an active market exists — a question that remains debated for crypto assets.

Step 3: Valuation at the Reporting Date

Valuation is one of the trickiest aspects. Unlike listed equities, there is no single definitive price source for crypto assets. In practice, you should:

• Select a reputable exchange price (e.g. CoinGecko, CoinMarketCap, or the client's own exchange) and apply it consistently
• Document the source and timestamp of the price used
• Apply the closing mid-market rate at the reporting date
• For large holdings, consider whether a mid-market price is representative or whether a bid price (for assets held) is more appropriate

If the client has crypto denominated in a non-GBP or non-functional currency, you will also need to apply IAS 21 for currency translation. Treat the crypto as a non-monetary item and translate at the historical rate on acquisition — do not retranslate at spot rate at the year end.

Step 4: Disclosure Obligations

Your client's financial statements must adequately disclose digital asset holdings. Even in the absence of a specific standard, the overarching requirements of IAS 1 and FRS 102 Section 8 apply. Key disclosures include:

• The nature and purpose of the digital asset holdings
• The accounting policy adopted (cost or revaluation model, impairment approach)
• The carrying amount and fair value where materially different
• Any significant judgements or estimation uncertainty around valuation
• Movements in the period (acquisitions, disposals, impairments)

For UK companies, HMRC also requires accurate record-keeping for Capital Gains Tax purposes. Each disposal event — including crypto-to-crypto swaps — is a taxable event. Make sure your client understands this and maintains a transaction log.

Step 5: AML and Enhanced Due Diligence

When a client holds or transacts in crypto, your AML obligations are heightened. Under the UK Money Laundering Regulations 2017 (as amended), accountants acting as trust or company service providers, or providing tax advice, are covered entities. You should:

• Apply enhanced due diligence (EDD) where crypto holdings represent a higher-risk indicator
• Verify the source of funds for crypto acquisitions — especially large or unexplained amounts
• File a Suspicious Activity Report (SAR) via the National Crime Agency if you have suspicion of money laundering
• Document your risk assessment in the client file

Step 6: Know When to Escalate

There are situations where you should escalate rather than proceed alone:

• The client holds highly complex instruments (DeFi positions, NFTs, yield farming) where valuation is genuinely uncertain
• Material balances that require specialist valuation or legal advice
• AML red flags — unusual transaction volumes, anonymous wallet addresses, reluctance to provide source-of-funds documentation
• Any crypto activity connected to regulated financial services (VASP activity, token issuance) that may require FCA registration

Escalating is not a sign of weakness — it is professional judgement in action.

Practical Checklist

• Obtain full inventory of digital assets held at year end
• Confirm classification (intangible asset, financial instrument, inventory)
• Select and document the valuation source
• Apply cost model or revaluation model consistently
• Test for impairment where carrying value exceeds market price
• Prepare appropriate disclosures in financial statements
• Maintain HMRC-compliant transaction records for CGT purposes
• Complete AML risk assessment and apply EDD if required

Stay Up to Date with Learnsignal CPD

The digital assets landscape is evolving rapidly. Regulatory guidance, IASB developments, and HMRC rules are all moving fast. Learnsignal's CPD courses cover digital assets accounting, MiCA regulation, and AML obligations — so you can advise clients with confidence. Explore our CPD courses today and ensure your knowledge is current.