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This article was first published in the September 2018 international edition of Accounting and Business magazine.

The rollercoaster ride of bitcoin and cryptocurrencies has sparked the interest of many investors. However, while the price of cryptocurrency is certainly exciting to watch, professionals are recognising it’s the underlying innovation – blockchain technology, and the ideals it encapsulates – that is revolutionary.

Blockchain could democratise the distribution of value in the same way the internet has democratised the distribution of information. When we think of this peer-to-peer exchange of value, we typically think of money, but the technology can allow any digital asset to be exchanged in a decentralised manner.

The term ‘cryptocurrency’ has been used as a catch-all to refer to blockchain-powered native coins and tokens as well as actual cryptocurrencies, but in reality these crypto assets fulfil different functions and should be categorised appropriately. By categorising them as either currencies, commodities or tokens, we can start to evaluate their legal, tax and accounting impact.


These aim to be a digital form of money, meeting the attributes of a store of value, unit of account and medium of exchange. That is not to say that all cryptocurrencies irrefutably meet these criteria, but their main purpose is to achieve this status. Hundreds of cryptocurrencies now exist, originating with bitcoin, each providing different attributes – zcash, for example, offers privacy guarantees.


These are defined as tradable raw materials that act as the ingredients for finished products. Commodities are usually thought of as physical items such as gold or cereals, but we increasingly rely on digital materials – ie computing power, storage capacity and bandwidth – to support our activities and the creation of goods, and these have themselves become a form of commodity. For instance, to store healthcare records on a blockchain-based system, a platform may require ether to power its Ethereum-based smart contracts, filecoin to purchase digital storage, and golem for computer power.


These are used for end-user applications. They offer consumers access to, and use of, the digital platform or product, and are often called utility tokens. Steemit is a social media platform which rewards users with steem tokens for creating and curating content. Users vote on which content is most valued on the basis of one steem token, one vote. Hence the more contribution a user makes to the system by curating content, the more influence they have over which content is highly rated.

The rise of initial coin offerings (ICOs) is synonymous with crypto tokens. ICOs allow startups to raise funds by selling their tokens even before the product has been developed. The theory goes that purchasers will later use their tokens on the platform and become part of the community. (See also ACCA’s report, ICOs: real deal or token gesture?) However, in practice, purchasers are often buying the token to invest in an early-stage venture. The emergence of sophisticated secondary markets for trading such tokens further implies this, so while the tokens do not have the traditional aspects of a security, such as the right to vote or receive a dividend, regulators are treating them as such.

In the US, the Howey test is used to define whether an asset should fall under securities law. An asset is classed as a security if a person ‘makes an investment of money in a common enterprise with the expectation of profits from a third party’. Some tokens present themselves as security tokens, with limited related rights such as a dividend, but many coins masquerade as utility tokens simply to avoid regulatory burden.

No single class

While categorising crypto assets could vastly clarify the regulatory implications, new crypto assets don’t fit cleanly into one class. Assets may even move from one category to another – for example, from a security token at ICO stage to a utility token once a platform has been launched.

Although few countries have created legally binding regulatory frameworks, some attempts have been made. The US state of Wyoming has issued five blockchain-related bills, including one that excludes utility tokens as commodities or securities. Lithuania has introduced ICO regulation, and Belarus has issued national accounting standards for digital tokens.

However, most regulators are still pondering how to define and treat crypto assets, and their public statements can be as confusing as they are helpful. This uncertainty and lack of clarity is illustrated in the positions taken on crypto-assets by the different US regulators (see below).

While there is a drive towards clarity of regulation, a fundamental grasp of crypto assets is needed to ensure the substance of each type of asset is properly understood. Regulators must act to protect citizens under their jurisdiction without stifling innovation. The industry needs to be involved, either through self-regulation or by advising governments to publish appropriate frameworks. Countries that respond with flexibility and openness may end up the winners in bringing about true blockchain innovation and adoption.

Georgina Kyriakoudes FCCA, professional training manager, Blockchain Initiative at the University of Nicosia, Cyprus

Regulatory overlap

US regulators have tried to define the crypto assets under their jurisdiction, but their different interpretations merely add to the general uncertainty about how to define such assets.

Swipe to view table

Regulator Position
US Securities and Exchange Commission Although a cryptocurrency is not a security, many ICOs are regulated as private placement securities
Commodity Futures Trading Commission Virtual currencies are ‘goods’ exchanged in a market for a uniform quality and value, and fall well within the common definition of ‘commodity’
Financial Crimes Enforcement Network A developer exchanging tokens (via an ICO or exchange) for ‘another type of value that substitutes for currency’ is a money transmitter
Internal Revenue Service For federal tax purposes, virtual currency is treated as property