Navigating the Evolving Landscape of Cryptocurrency & Digital Assets Accounting in Malta

The emergence of cryptocurrencies and digital assets has transformed financial markets, driven by technological advancements and the need for decentralization.

Cryptocurrencies are digital currencies secured by cryptography, functioning as a medium of exchange without central authority control. Digital assets, a broader category, include cryptocurrencies alongside digital goods such as artwork, music, and software.

Digital assets are classified into three main types:

• Asset-Backed Tokens: These derive value from real-world assets like gold, real estate, or fiat currency, representing ownership or rights.

• Utility Tokens: Provide access to services within a blockchain ecosystem (e.g., Ethereum for smart contracts).

• Security Tokens: Represent ownership in investments such as shares, real estate, or bonds, subject to regulatory oversight.

Accounting for Digital Assets

Accounting treatment depends on whether an entity is a holder (investor) or an issuer (creator). This article focuses on holders.

Accounting for digital assets requires careful evaluation of classification and valuation methods under IFRS. Proper financial reporting ensures compliance and transparency, particularly for businesses investing in or transacting with cryptocurrencies and tokenized assets.

Cryptocurrencies

Despite their use as a payment method, cryptocurrencies do not qualify as cash equivalents under IAS 7 and IAS 32 due to price volatility and limited acceptance as legal tender. Instead, they are classified as:

• Intangible Assets (IAS 38): If held for investment, measured at cost or revaluation.

• Inventory (IAS 2): If held for resale, measured at lower of cost or net realizable value.

Asset-Backed Tokens

Accounting depends on the underlying asset:

Type	Accounting Treatment	Standard
Tokenized Real Estate	Investment Property / Fixed Asset	IFRS 16 / IAS 40
Gold-Backed Tokens	Inventory / Financial Asset	IAS 2 / IFRS 9
Fiat-Backed Stablecoins	Cash Equivalent (if redeemable)	IAS 7
Tokenized Securities	Financial Instruments	IFRS 9

Valuation methods include:

• Fair Value (IFRS 13): Market price for actively traded tokens.

• Net Asset Value (NAV): For real estate or illiquid assets.

• Historical Cost: With impairment testing.

Utility Tokens

Utility tokens depend on their use:

• Intangible Assets (IAS 38): If held long-term for appreciation.

• Inventory (IAS 2): If held for resale.

  
  

Security Tokens

Since security tokens represent financial assets, they are classified based on their structure:

Classification	Accounting Treatment	Standard
Equity-like Tokens	Financial Asset (Equity Investment)	IFRS 9
Debt-like Tokens	Financial Liabilities / Investments	IFRS 9
Real Estate-Backed Tokens	Investment Property / Fixed Asset	IAS 40 / IFRS 16
Revenue-Sharing Tokens	Financial Instruments (Equity/Debt)	IFRS 9

Get in Touch:

---

Sabrina Sacco

ssacco@quazar.mt / +356 2388 4600