Accounting for Cryptocurrency

How we can help with your Accounting

At Braant, we have a specialist team of tax accountants solely for cryptocurrency, so we can account your Crypto gains and profits accurately. From Bitcoin tax to advanced cryptocurrency accounting, your portfolio will be in safe hands. For more information, contact us.

 

Many of those who made even small investments in cryptocurrency such as Bitcoin back in 2009, are now millionaires. Today, there are many more cryptocurrencies; Ethereum, Ripple and Litecoin amongst others. Even so, while cryptocurrencies incite excitement and curiosity, few people actually understand much about it, how it’s generated or how it works.

 

What is Cryptocurrency?

Cryptocurrency is a form of digital cash that has no intrinsic value in so much as it’s not legal tender and is not backed by government or any financial institution. It’s completely decentralised, meaning transactions are peer-to-peer (P2P) validated and confirmed. Cryptocurrency security depends on public key, asymmetric cryptography and the blockchain. The blockchain is a public ledger of transactions – everyone on the network has a copy of the ledger, tracing the history of each transaction. Once created, the blockchain cannot be changed.

  

What are the Inherent Issues of Cryptocurrency?

The immutable blockchain is both security and risk. Risk, because it’s possible to intercept the transfer of cryptocurrencies or the funds invested in them (for the majority who are not mining). Whether by malicious intent or user error, Bitcoin or other cryptocurrencies can vanish into thin air. It’s also possible to lose a wallet (records of cryptocurrency ownership are kept in locally stored files known as wallets) or fall victim to spoof payment information or phishing sites. Since the blockchain that records the transaction can’t be changed, there’s little to no chance of recovering lost investments.

  

What are the Accounting Challenges of Cryptocurrency?

Current accounting systems weren’t designed to deal with virtual currencies – such as Ether, Litecoin, Monero, Ripple and Dash – and their many divergences from how fiat money behaves. They don’t, for instance, meet the standard definition of a financial asset. Typical challenges revolve around calculating taxes for profits or gains (such as tax on Bitcoin), the impacts of mining, or how to deal with forks in the blockchain. Even determining the fair value of a cryptocurrency exchange for fiat money is challenging, given its volatility.  Accurate accounting that satisfies HMRC needs an in-depth understanding, gained only through specialised study by a senior tax accountant.

Contact us to discuss your Cryptocurrency requirements.