The Legal Nature of Cryptocurrency as Property: Accounting and Taxation Implications

Abstract

This Article takes an interdisciplinary approach to examining the legal nature of cryptocurrency as property and its accounting and taxation implications for companies holding cryptocurrencies. Nowadays an increasing number of companies accept cryptocurrencies as payment and investment methods, but it is still unclear how to classify them as property, which results in uncertainties relating to their treatment for accounting and taxation purposes. This is a significant issue because it may affect the available legal remedies, presentation of companies’ financial statements and taxation outcomes. Although the legal status of cryptocurrency as property has now been well explored, little research has been conducted to think about the property, accounting and taxation aspects together.

While cryptocurrencies are likely to be treated as either things in action or general intangible properties in law, in accounting they are often treated as inventories or intangible assets. Yet neither of them can satisfactorily represent the true nature of cryptocurrencies as property, because they fail to take into account the unique features of cryptocurrencies. We make several suggestions for improvement, including enhancing disclosure and making better use of contractual arrangements in the short run. In the long run, new legal provisions and accounting standards should be developed specifically for cryptocurrencies to better reflect their unique nature and features as property. But most importantly, professional judgement should always be exercised to ensure a true and fair view about cryptocurrencies is presented.

Keywords: Cryptocurrency; Property; Accounting treatment; Valuation; Taxation

JEL Classification: E22; G11; K11; K22; K34