Accounting and Tax Regulation of Cryptocurrencies

Abstract

The digital age creates new concepts, methods, and rules that are affecting the accounting process which presents new challenges in accounting practice. One of the most significant changes and innovations within accounting processing and the financial industry is the emergence of cryptocurrencies that create a completely new financial business concept. Cryptocurrency is the equivalent of electronic money and is completely digital. Cryptocurrencies and transactions with cryptocurrencies are frequent appearances in todayʼs modern business but are not fully regulated. Accounting and tax treatment in the Republic of Croatia and other European Union countries but also beyond is not fully established and adjusted for doing business with cryptocurrencies. Due to the mentioned lack, cryptocurrencies and their transactions require strict regulation and adjustment operations. This article aims to investigate the development of cryptocurrencies and their involvement in the financial industry and business environment, with a focus on the accounting and tax treatment of cryptocurrencies within the accounting profession. Cryptocurrencies are rapidly developing on a daily basis and pose a significant challenge to the financial industry and especially their regulation within the accounting profession. A systematic literature review was undertaken to provide an overview of the related area of cryptocurrencies and their accounting and tax treatment. The terms ("cryptocurrency") and ("accounting" OR "tax") were used to collect data. The papers were reviewed to investigate whether a cryptocurrency control system has been established from an accounting and tax point of view and whether it functions as such but also its impact on the financial industry. Results indicate that the main problem that arises around the concept of cryptocurrencies and their accounting and tax treatment is insufficient regulation and inconsistencies in the implementation, monitoring, and evaluation of cryptocurrencies in the field of accounting at the local but also global levels.

Exploring the uncharted territories: a structured literature review on cryptocurrency accounting and auditing

“…The sub-classification denoted as (D5) “Theoretical/literature review” is represented only by one article (Martinčevic et al. , 2022), which is a systematic literature review on cryptocurrency accounting and taxation.…”

“…, 2022; Păunescu, 2018), although the continuous growth and fluidity of these digital currencies put a strain on the development of standards customized to crypto-assets, especially cryptocurrencies (Chou et al. , 2022; Martinčevic et al. , 2022).…”

“…Various viewpoints can be found regarding the asset class or the way cryptocurrencies should be classified. The main hierarchy identified in the literature (Blahušiaková, 2022; Brukhanskyi and Spilnyk, 2019; Luo and Yu, 2022; Martinčevic et al. , 2022; Morozova et al.…”

“…It is stated that cryptocurrencies do not fall under the incidence of IFRS 9 or IAS 32 because they do not meet the definition of financial instruments (Angeline et al. , 2021; Blahušiaková, 2022; Martinčevic et al. , 2022; Ram et al.…”

“…Their taxation can vary depending on the jurisdiction and the classification of the digital currency (Angeline et al. , 2021; Martinčevic et al. , 2022), but also their legal characterization (Kablan, 2019), thus determining the nature and applicability of taxes imposed on cryptocurrency income.…”