Companies Are Increasingly Investing in Cryptoassets – What Does This Mean for Accounting?
In recent years, the investment landscape has evolved rapidly, with businesses showing growing interest in cryptoassets. Once considered niche, cryptoassets like Bitcoin and Ethereum have become part of mainstream finance. Major companies are making headlines for allocating a portion of their treasury to digital assets, signaling a shift in how corporate funds are being diversified.
Notable Companies Investing in Cryptoassets
Some prominent examples of companies that have invested in cryptoassets include:
- Tesla Inc. – Made headlines in 2021 with its US$1.5 billion investment in Bitcoin.
- MicroStrategy – A pioneer in corporate crypto investment, with billions of dollars held in Bitcoin.
- Block Inc. (formerly Square Inc.) – Has invested significantly in Bitcoin as part of its belief in the asset’s potential.
- Coinbase – While a cryptocurrency exchange, it also holds substantial cryptoassets on its balance sheet.
- Singapore-based DBS Bank – Launched a digital exchange and has exposure to tokenised assets, reflecting local market interest.
These moves signal increased corporate confidence in cryptoassets, but they also bring new challenges—especially in financial reporting.
Accounting for Cryptoassets: Summary of ISCA Guidance
The Institute of Singapore Chartered Accountants (ISCA) has issued FRG 2 – Accounting for Cryptoassets from a Holder’s Perspective, which provides useful guidance for entities on how to account for such holdings.
Although cryptocurrencies are often referred to as “digital currencies,” they typically do not meet the definition of cash or cash equivalents under SFRS(I) 1-7, because they are not legal tender and are not widely accepted as a medium of exchange. In addition, they do not qualify as financial assets under SFRS(I) 9, as they do not give rise to a contractual right to receive cash or another financial asset.
Possible Accounting Treatments for Cryptoassets
| Cryptocurrency | Utility Token | Asset Token | Security Token | |
|---|---|---|---|---|
| Nature | “A digital or virtual currency that uses cryptography for security. Cryptocurrencies are used as payment for acquiring goods or services or transfer of funds. | Utility tokens provide the holder with rights to access a product or service. | Asset tokens provide the holder with rights to an asset. Rights to assets may be split among many holders by “tokenising” them. In this way, the issued tokens, called asset tokens, indicate rights over a stake in these underlying assets. | Security tokens provide the holder with rights to a security. Security tokens are similar in nature to an interest in the debt or equity of the issuer by, for instance, giving the holder the right to a share of future profits or cash flows. |
| Guide | The holding of a cryptocurrency is accounted for as inventory under FRS 2 Inventories if an entity holds it for sale in the ordinary course of business or if the entity is a broker-trader of cryptocurrencies. If FRS 2 is not applicable, the holding is accounted for as an intangible asset under FRS 38 Intangible Assets. | If FRS 2, FRS 38 or FRS 109 do not apply, an entity considers recognising the utility token as a prepayment if it represents payment that has been made before receiving the product or service. | An entity applies the FRS relevant to the underlying asset if the asset token represents control over the underlying asset. | An entity applies FRS 32 to consider whether a security token is a financial asset and if yes, applies FRS 109 to recognise and measure it in the financial statements. |
| FRS 2 Inventories SFRS(I) 2 Inventories | If the entity holds it for sale in the ordinary course of business or if the entity is a broker-trader of cryptocurrencies | If the entity holds it for sale in the ordinary course of business or if the entity is a broker-trader of cryptocurrencies | The relevant FRS depends on the underlying asset, and not the asset token | If it meets the definition of a financial asset in FRS 32 |
| FRS 38 Intangible Assets SFRS(I) 1-38 Intangible Assets | If it meets the definition and recognition criteria of an intangible asset and FRS 2 is not applicable | If it meets the definition and recognition criteria of an intangible asset and FRS 2 and FRS 109 are not applicable | The relevant FRS depends on the underlying asset, and not the asset token | Not applicable |
| FRS 116 Leases SFRS(I) 16 Leases | Not applicable | If it represents a right to use an underlying asset for the lease term | The relevant FRS depends on the underlying asset, and not the asset token | Not applicable |
| Prepayment | Not applicable | If it represents payment made in advance of the entity obtaining a right to access goods or receiving services | The relevant FRS depends on the underlying asset, and not the asset token | Not applicable |
Conclusion
Cryptoassets are gaining traction in corporate finance, but they challenge traditional accounting approaches. ISCA’s FRG 2 helps ensure consistent, transparent classification and reporting. Each case requires judgment based on substance over form.
If your company holds or plans to hold cryptoassets, we’re here to guide you through proper classification and disclosure.
