Entrepreneurs who want to make profits from trading in cryptocurrencies or want to collect capital via an Initial Coin Offering not only need to have a good feel for the cryptocurrency market and demonstrate a high level of technical affinity. They are also faced with a tax problem that many only recognize as such at second glance. This is the accounting of cryptocurrencies.
What problems are there when accounting for Bitcoin?
The top four challenges in accounting for Immediate Bitcoin robot are as follows:
- Booking “crypto to crypto” is not that easy
- Thousands of transactions have to be recorded and backed up with receipts
- They have to record and evaluate fees for each transaction
- ICOs, staking, masternodes, and other special features are to be recorded in line with their tax classification
The accounting software cannot present crypto transactions
A commercially active company need to always record all business dealings in its accounting. In addition, this includes issuing your own tokens or trading in cryptocurrencies to raise capital. However, these processes often do not take place against state currency but are carried out “crypto-to-crypto”, i.e. one cryptocurrency is exchanged for another. A fiat currency is not addressed here.
Nonetheless, standard accounting programs need fiat currency to be able to form a posting record.
Always state the value of the tokens in dollars
In order for an exchange of crypto values to be properly recorded in accounting, the system has to always convert the exchanged tokens into the value of their dollar. At the same time, the inventory of cryptocurrencies held by the company needs to be updated. This also applies if you only transfer cryptocurrencies from one company wallet to another company-owned wallet or from or to a cryptocurrency exchange.
Accurate tracking of such internal movements is also necessary to appropriately regulate capital gain. Since thousands or even tens to hundreds of thousands of transactions occur per month, especially in arbitrage trading, the accounting software must also be able to process such a large number of transactions as automatically as possible.
Accounting for cryptocurrencies requires individual solutions
Another problem with the conversion of cryptocurrencies into dollars is that the smallest unit that can be displayed in accounting is 0.01 dollars. Nonetheless, you can trade cryptocurrencies in much smaller units. This applies in particular to the stock exchange and network fees that are incurred with almost every transaction. These must also be documented in the accounts.