As the digital asset ecosystem grows and regulatory scrutiny increases, the importance of proper tracking & visibility – crypto accounting – does too.
Few people get excited when they hear the word accounting, especially in the move-fast-and-break-things environment of innovative digital asset projects. However, proper digital asset accounting is wholly necessary to launching, managing, and building successful products and enterprises in digital assets and tokenization. Accounting is the unglamorous infrastructure needed to keep the shiny glowing surface that is Web3 alive.
And think about it – when you build a house, you don’t skimp on the plumbing. If you do, you may eventually have to tear up the house to fix it, or even worse, faulty plumbing can cause the house to crumble or flood. It’s this analogy that correlates perfectly with digital asset accounting operations. When it comes to laying the pipes of digital asset accounting, you want to use the strongest, highest security, and most accurate. That’s what we’ve built at Ledgible.
As a SOC 1 & 2 Type 2 audited platform that works with leading enterprises and institutions like FIS, Thomson Reuters, Intuit, and large banks, Ledgible is the premium and trusted tool of choice for integrating proper digital asset accounting. So, let’s take a look at this process a little further, breaking down the basics of what you need to know.
At its core, Crypto accounting is the process of recording and tracking digital asset transactions for financial reporting and tax purposes. It is important for individuals, businesses, and organizations that own, trade, or mine cryptocurrencies to keep accurate records of their crypto-related activities.
Here are some of the must knows in the process of laying the framework for proper accounting in digital assets:
- Identify your crypto assets: Determing which cryptocurrencies one owns, needs to manage, and what crypto verticals you work in is essential. To properly account for digital assets, one needs to keep track of the acquisition date, cost basis, and any fees associated with purchasing or trading the crypto assets, among a wealth of other accounting footnotes. This tracking, the part where non-accountants eyes may glaze over, is what Ledgible does automatically. Direct integration through APIs, automated basis and gain calculation, transaction tracing, you name it and Ledgible takes care of it.
- Understand tax & accounting implications: Digital assets have varying regulations and treatments depending upon which geographical location one operates in. This non-standard treatment necessitates enterprises and investors have a firm grasp of their accounting. Navigating complex regulatory hurdles is made easier when one fully grasps the data they have at their fingertips.
- Keep detailed records: Record all crypto transactions, including purchases, sales, transfers, and mining activities. Make sure to keep detailed records of the date, amount, and value of each transaction. One could do this manually in a spreadsheet, or you could use the leading crypto accounting subledger, Ledgible, to take care of this tracking and data warehousing automatically.
- Make things Ledgible: At Ledgible, we like to say we make crypto ledgible. In essence, our tools aggregate, normalize, and make Ledgible digital asset data for tax and accounting purposes. Serving as the translation step between digital assets and traditional financial processes. We run our own data layer to ensure data accuracy, built our own tax and accounting algorithms in-house with testing by leading accounting firms, and offer an ever-growing list of integrations with platforms.
So, back to the original analogy. Most homeowners don’t love plumbing, they don’t spend their days obsessed with backwater valves and piping. They, instead, trust certified industry professionals to handle the dirty work. At Ledgible, we love digital asset tax and accounting – you can trust us to handle the mess.
This post is commissioned by Ledgible and does not serve as a testimonial or endorsement by The Block. This post is for informational purposes only and should not be relied upon as a basis for investment, tax, legal or other advice. You should conduct your own research and consult independent counsel and advisors on the matters discussed within this post. Past performance of any asset is not indicative of future results.
© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.