Crypto Accounting Guide: Workflows, Compliance & Best Software
Learn crypto accounting basics, challenges, and software solutions. See how Slash simplifies managing crypto and fiat transactions for businesses.
Crypto accounting 101: challenges, workflows, and best practices
More businesses are weaving blockchain and crypto into their financial workflows. From stablecoin transfers to paying vendors in digital currencies, crypto is no longer just for early adopters; it’s becoming a real part of how companies move money, even for small businesses just starting out.
But once you introduce crypto, your accounting can quickly get messy. Payments and expenses might now live across multiple wallets, mixing fiat and crypto environments, which makes it difficult to maintain a single clean, reliable financial record. Without the right tools, this can mean endless spreadsheets and manual reconciliation.
Financial platforms like Slash are helpful tools for your crypto accounting team.¹ By integrating crypto activity alongside traditional banking and accounting, Slash² removes the mess of tracking two separate systems. Your team gets one dashboard for fiat and crypto, integrated with tools like QuickBooks and Xero, so crypto accounting becomes a cohesive part of your workflow.
In this guide, we’ll break down what crypto accounting really is, the hurdles you’ll face, how it impacts your business operations, and the solutions that simplify it. We’ll also show how Slash helps unify your financial stack, giving you financial visibility and accounting ease across both cash and crypto.
What is crypto accounting and why does it matter for growing businesses?
Crypto accounting is accounting and bookkeeping of crypto assets; tracking, valuing, and reporting of digital tokens and currencies in your financial ledger. Crypto accounting ensures that your books reflect all of the valued transactions you make in exchanges on-chain and can differentiate from traditional accounting in a number of key ways:
- Digital system. At its most basic, crypto accounting involves crypto payments, trades, loans, and more. For those businesses new to crypto, this can mean dealing with potentially confusing new materials, jargon, and payment methods when beginning your accounting.
- Complex ecosystem. Your crypto can live and move across a variety of wallets, exchanges, and payment platforms. In practical crypto accounting applications, this can mean complexity in monitoring, managing, and reporting all of your transactions in real-time, across sites.
- Volatility. While some cryptocurrencies like stablecoins are built for price stability, that isn’t always the case. Bitcoin and Ethereum, two major forms of cryptocurrency, are highly volatile assets, meaning their price fluctuates minute-to-minute. For accounting, this can mean difficult reporting depending on when you buy and when you report.
- Evolution of reporting rules. Like crypto itself, laws, regulations, and reporting requirements around crypto are just beginning to take off. This means that crypto accounting is a fast-changing field.
From small businesses to large enterprises, running into accounting errors can be costly, harm your credibility, and affect your business’s legal standing. Accurate reporting and clean bookkeeping across crypto platforms and wallets are essential for businesses getting into or already operating with crypto payments and blockchain environments.
Key challenges in crypto accounting
Unlike fiat exchanges, crypto payments, lending, and expenses can occur across various digital networks. Added differences related to price fluctuations and emerging tax laws can further complicate crypto accounting. Knowing what to look for is a great first step for your accounting team:
Tracking Fragmented data across wallets and exchanges
Many crypto-native financial teams will have activity in multiple crypto wallets, more than one exchange, and various payment apps or platforms. Without any inherent central marketplace, reconciliations can be hard to monitor and control.
Valuing crypto with price fluctuations
In accounting, it’s important to track values accurately. With cryptocurrencies, however, their volatility can cause challenges for your accounting teams. It’s important to maintain a consistent pricing policy with sources and timestamps accurately tracked. Additionally, staying up-to-date with laws, such as US GAAP, ensures you are tracking your crypto finances and accurately maintaining financial statements. Right now, that means crypto holdings must be measured at fair value with changes in net income.
Managing high-volume transactions
Crypto ledgers can become complicated by the high volume of crypto transactions. Micropayments, swaps, trading, and exchanges can add up and cause difficulty.
Staying compliant with tax and reporting requirements
Crypto accounting and crypto accountants must contend with unique tax and reporting requirements. In the US, crypto is treated differently from fiat currencies, with digital assets instead being recorded as property. Knowing what qualifies as capital gains, income, inventories, and intangible assets can be complicated, so referring to US and IFRS resources is necessary for crypto accounting teams.
Avoiding errors from manual processes
Manual processes, especially in accounting, can leave ledgers and financial statements prone to errors and tedious manual labor for your crypto accounting teams. Luckily, digital assets are native to digital ecosystems where automated tools can help with financial tracking and preparation of financial statements, ensuring you limit audit and misreporting risks.
You can anticipate some hoops to jump through when crypto accounting and preparing for future audits. Knowing the challenges before you begin can be useful, but knowing how crypto accounting works more generally can also boost your ability to accurately track crypto transactions and exchanges and set you up for success with blockchain accounting.
How crypto accounting works in practice
Crypto accounting works similarly to your typical fiat or cash accounting, but there are wider ecosystems, rules, and regulations to be mindful of. To give a general overview, the process of crypto accounting can be broken down into four steps:
Collecting transaction data
Keeping accurate records of your crypto activity involves collecting information across wallets, exchanges, and payment platforms. Knowing where you’re using your crypto assets is key, and tools like Slash can be used to automate and track your blockchain data, seamlessly creating and maintaining accounting ledgers.
Categorizing income and expenses
In accounting, reporting correctly is key and will save you time and energy when auditing and tax filing down the road. Crypto accountants can manually or automatically, using digital tools, label payments, vendor and customer spending, income, interest, and more, using rules to categorize ledgers and maintain clear financial reporting.
Calculating gains and losses
Tracking costs basis involves reporting capital gains and losses and income. According to GAAP, ensuring that you track income and expenses at fair market value is standard. Fair value can change depending on net income and flows through comprehensive income, meaning it’s important to stay on top of your reporting.
Generating reports and filing taxes
Crypto accountants will need to generate reports and file taxes, producing audit logs and tax filing reports. This includes 1099-DA forms and transaction histories. For crypto accountants, ensuring that your records match what you’ve reported is key, and utilizing automated tools while scaling with crypto now can help you here when reporting in the future.
Best software for effective crypto accounting
There are a number of crypto accounting tools and software available for your business to utilize today. Paying attention and comparing options based on accounting integrations, supported blockchains, wallets, and platforms, and unification with fiat and traditional cash accounting.
Slash
Slash functions as a financial hub for businesses, consolidating both fiat and crypto transactions in one platform. By connecting directly with traditional accounting platforms like QuickBooks and Xero, Slash enables businesses to seamlessly integrate accurate crypto transaction data into their general ledger, eliminating manual entry, streamlining workflows, and simplifying reconciliation and cash flow management.
Koinly
Koinly is an automated crypto tax reporting and portfolio tracking software. Koinly lets you integrate cryptocurrencies like Bitcoin and Ethereum from blockchain into their software.
CoinTracker
CoinTracker is a crypto tax software known for its seamless integration with wallets and exchanges, such as Coinbase. They support a variety of blockchains and offer simplified reporting.
Cryptio
Crypto is designed for businesses, offering audit-ready reports and advanced accounting features.
Frequently Asked Questions
Who taxes crypto?
In the US, the IRS taxes crypto assets and treats them as property. Report your crypto taxes with the 1099-DA form.
How much does a crypto accountant cost?
There is no standardized cost for all crypto accountants. Instead, employee income may be determined on years of experience, industry background, and skillsets. Using automated accounting tools can sometimes be free of charge.
What is the IFRS treatment for cryptocurrency transactions?
IFRS treats cryptocurrency transactions differently based on a company’s purpose for having crypto.
¹ Slash Financial, Inc. is a financial technology company and is not a bank. Banking services provided by Column N.A., Member FDIC.
² Cryptocurrency conversion, transfer, and custody services are provided by Bridge, not by Column, N.A. or Slash. Cryptocurrency is not custodied by any bank, is not FDIC-insured, may fluctuate in value, and is subject to loss. Terms and conditions apply.