Cryptocurrency Accounting: ASU 2023-08 Fair Value, Tax Rules and Form 1099-DA in 2026

Cryptocurrency accounting under US GAAP now means measuring most crypto holdings at fair value each reporting period and running the change through net income, as required by ASU 2023-08 (ASC 350-60). For tax, the IRS still treats crypto as property, so gains and losses are recognized only when units are sold, exchanged or spent. Book and tax therefore diverge every quarter, and the gap has to be tracked.

This guide sets out the cryptocurrency accounting rules a US business or its CPA firm needs in 2026, from scope and disclosure under the fair value standard to IRS reporting, followed by illustrative journal entries.

Cryptocurrency Accounting Under ASU 2023-08

The FASB issued ASU 2023-08 in December 2023 and placed it in a new Codification subtopic, ASC 350-60. According to Deloitte's summary of the final standard, entities must "subsequently measure crypto assets at fair value, with changes in fair value included in net income" in each reporting period.

Scope: The Six Criteria

A holding falls under ASC 350-60 only when it meets all six conditions in ASC 350-60-15-1:

1. It meets the US GAAP definition of an intangible asset.
2. It gives the holder no enforceable rights to or claims on underlying goods, services or other assets.
3. It resides on a distributed ledger based on blockchain or similar technology.
4. It is secured by cryptography.
5. It is fungible.
6. It was not created or issued by the reporting entity or its related parties.

Bitcoin and ether held by an operating company usually pass all six. Deloitte's implementation FAQ notes that "some stablecoins will be classified as financial assets or financial instruments," that other stablecoins "may not meet all the scope criteria," and that wrapped tokens must be assessed asset by asset. Most NFTs fail the fungibility test, so they stay outside the standard. Our guide to how NFTs and other digital assets are taxed covers their tax side.

Effective Dates and Transition

ASU 2023-08 is effective for all entities for fiscal years beginning after December 15, 2024, including interim periods within those years. Early adoption was permitted. For a calendar-year company, the standard applied from 1 January 2025, so the 2025 financial statements were the first full year under fair value, and 2026 reports are the first with a comparative year on the new basis.

Transition is a cumulative-effect adjustment to opening retained earnings at the start of the adoption year. Deloitte notes that retrospective restatement of prior periods is not allowed. The adjustment equals the difference between the old impaired carrying amount and fair value on the adoption date. Our article on ASC 250 accounting changes explains how cumulative-effect adjustments are presented.

Presentation

ASC 350-60 sets three presentation rules:

• Balance sheet. Crypto assets measured at fair value are presented separately from other intangible assets.
• Income statement. Remeasurement gains and losses are presented separately from changes in the carrying amount of other intangible assets.
• Cash flow statement. Cash from a nearly immediate sale of crypto received as noncash consideration in the ordinary course of business is classified as an operating cash flow.

Disclosures

The standard requires these disclosures:

The cost basis disclosures mean the subledger must keep historical cost by lot even though the balance sheet shows fair value. PwC's crypto guide says an entity "should adopt a method (e.g., specific identification, FIFO) to identify the units sold." The same discipline applies on the tax side, which our explainer on crypto cost basis calculation walks through lot by lot.

The Impairment Model Before ASU 2023-08

Before ASC 350-60, there was no crypto-specific guidance. Most holders treated crypto as an indefinite-lived intangible asset under ASC 350-30, carried at cost less impairment. PwC's impairment guidance notes that "given the nature of many crypto assets, they usually have an indefinite useful life."

Deloitte notes that impairment testing required entities to use a crypto asset's lowest observable fair value within the reporting period. PwC states that "once the intangible asset is impaired, the impairment loss is not reversed if the fair value subsequently increases." A company could report a loss on a token that ended the quarter above its purchase price, and the recovery stayed off the books until sale.

This model still applies to crypto intangibles that fail the six scope criteria, such as most NFTs.

How the IRS Taxes Crypto as Property

The IRS virtual currency FAQs say Notice 2014-21 explained that "virtual currency is treated as property for federal income tax purposes." The IRS notes these FAQs "generally apply to transactions involving digital assets completed before Jan. 1, 2025."

The practical rules from the FAQs:

• Basis. Basis is "the amount you spent to acquire the virtual currency, including fees, commissions and other acquisition costs in U.S. dollars" (Q8).
• Gain or loss. Gain or loss is the difference between adjusted basis and the amount received, reported in US dollars (Q7).
• Holding period. One year or less gives short-term gain or loss; more than one year gives long-term (Q6).
• Payment for services. Crypto received for services is ordinary income at fair market value when received, and that value becomes the basis (Q9, Q12, Q13).

For a business, fair value remeasurement on the books has no tax effect. Taxable income picks up gains and losses only on disposal. That creates a temporary difference and a deferred tax asset or liability under ASC 740, which our plain-English guide to ASC 740 explains. Corporate holders should also read our breakdown of business cryptocurrency tax implications, and companies earning validator income should see our article on how staking rewards are taxed.

Form 1099-DA Broker Reporting for 2025 and 2026

The IRS digital assets page says broker reporting "is required to be made on Form 1099-DA beginning with transactions on or after Jan. 1, 2025." The rules phase in:

The Form 1099-DA instructions put gross proceeds in box 1f and cost or other basis in box 1g. A covered security is generally a digital asset acquired after 2025 in a custodial account and held there until sale. Anything acquired before 2026 is noncovered, and brokers may report its basis voluntarily. Holders must supply basis for those lots from their own records.

The IRS also granted transition relief. For 2025 transactions reported in 2026, it will not impose penalties for failure to file and furnish Forms 1099-DA if the broker makes a good faith effort. Under Notices 2024-56 and 2025-33, brokers also have backup withholding relief for all 2025 and 2026 transactions, and for some 2027 transactions.

The DeFi Broker Rule Repeal

In December 2024 the IRS published a second rule that would have treated certain decentralized finance front-end providers as brokers. Congress overturned it under the Congressional Review Act. Public Law 119-5, approved on 10 April 2025, says Congress "disapproves" the rule titled "Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales" and that "such rule shall have no force or effect." The IRS page now confirms the final regulations "do not include reporting requirements for brokers commonly known as decentralized or non-custodial brokers."

Custodial platforms still report. Self-custody and DeFi activity produces no 1099-DA and must be reconstructed from on-chain data. Our guide to DeFi tax reporting in 2026 covers that workflow, and our article on Form 1099-DA and broker reporting explains how to reconcile the form to Form 8949.

The Digital Asset Question on Form 1040

Every Form 1040 asks: "At any time during the tax year, did you: (a) receive (as a reward, award or payment for property or services); or (b) sell, exchange, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?" The IRS digital assets page says a version of the question also appears on Forms 1040-SR, 1040-NR, 1041, 1065, 1120, 1120-S and 709.

The IRS digital assets page says a taxpayer who only purchased digital assets with US or other real currency, without selling, answers "No." Receiving staking rewards, getting paid in crypto, or selling or swapping any token requires a "Yes."

Do Wash Sale Rules Apply to Crypto

Section 1091 disallows a loss on a sale of "shares of stock or securities" when substantially identical stock or securities are bought within 30 days before or after the sale. The text of 26 U.S.C. 1091 does not mention digital assets. As of October 2026, crypto that is treated as property under Notice 2014-21 sits outside the wash sale rule, and selling at a loss and rebuying immediately is generally permitted.

Tokenized securities and shares of crypto exchange-traded funds are securities, so the rule applies to them. As guidance, document a business reason for any rapid sell-and-rebuy, since general economic substance principles still apply. Our explainer on the wash sale rule and tax-loss harvesting covers the securities side.

Worked Example: Fair Value Journal Entries

This example is illustrative. A calendar-year C corporation that adopted ASU 2023-08 on 1 January 2025 buys 2 BTC on 15 March 2026 at $80,000 each and pays a $400 exchange fee. The fee is capitalized, which PwC says is the general approach. It records gross amounts and ignores the selling fee for simplicity.

15 March, purchase. Debit Crypto assets $160,400; credit Cash $160,400.

31 March, remeasurement. Fair value is 2 x $78,000 = $156,000. Debit Loss on crypto assets $4,400; credit Crypto assets $4,400.

30 June, remeasurement. Fair value is 2 x $95,000 = $190,000. Debit Crypto assets $34,000; credit Gain on crypto assets $34,000.

15 August, sale. Remeasure the 0.5 BTC sold from $47,500 to $50,000. Debit Crypto assets $2,500; credit Gain on crypto assets $2,500. Then debit Cash $50,000 and credit Crypto assets $50,000.

30 September, remeasurement. The remaining 1.5 BTC carried at $142,500 is now worth $135,000. Debit Loss on crypto assets $7,500; credit Crypto assets $7,500.

Year-to-date book income from crypto is a net gain of $24,600 (negative $4,400, plus $34,000, plus $2,500, minus $7,500).

On the tax side, nothing happens until August. The tax basis of 0.5 BTC is one quarter of $160,400, or $40,100. Taxable gain is $50,000 minus $40,100, which is $9,900 short-term. The remaining 1.5 BTC has a tax basis of $120,300 against a book value of $135,000, a $14,700 taxable temporary difference. At the 21% corporate rate, that is a deferred tax liability of $3,087 at 30 September. The $9,900 taxable gain and the $14,700 temporary difference together equal the $24,600 book gain, which is the tie-out a reviewer should check. Current tax on the $9,900 gain is $2,079, so total tax expense of $5,166 equals 21% of the $24,600 book gain.

Under the old impairment model, the company would have booked a Q1 impairment of at least $4,400 (more if bitcoin traded below $78,000 during the quarter) and ignored the Q2 recovery until sale.

Controls and Month-End Close for Crypto

As practitioner guidance, a workable close process includes:

• Wallet and exchange reconciliation. Match units per the subledger to exchange statements and on-chain wallet balances at each close, in the same way bank accounts are reconciled. Our 5-day monthly close checklist can absorb these steps.
• Pricing policy. Document the pricing source (the principal market under ASC 820) and cut-off time, and apply them every period.
• Lot-level cost records. Keep acquisition date, units, cost and fees for every lot. These feed the cost basis disclosure, the annual rollforward and Form 8949.
• Key custody controls. Restrict private key access and require multiple approvals for transfers.

Holders of tokenized securities or crypto ETF shares should apply equity security guidance; our article on accounting for equity securities under ASC 321 covers that model. UK subsidiaries follow different rules, outlined in our guide to crypto accounting for UK SMEs.

Frequently Asked Questions

Is cryptocurrency accounted for at fair value under US GAAP? Yes, for crypto assets that meet all six ASC 350-60 scope criteria, with changes in fair value in net income. Tokens outside the scope, such as most NFTs, stay at cost less impairment.

Can a private company still use the impairment model for bitcoin? No. ASU 2023-08 applies to all entities, public and private, for fiscal years beginning after 15 December 2024. A calendar-year private company had to switch on 1 January 2025 with a cumulative-effect adjustment to opening retained earnings.

Are unrealized crypto gains taxable? Generally no. The IRS treats crypto as property, so gain or loss is recognized on sale, exchange or other disposition.

Will my Form 1099-DA show cost basis? For transactions in 2025, brokers had to report gross proceeds only. From 2026, basis is reported for covered securities, which generally means assets acquired after 2025 in a custodial account. Older lots need basis from your own records.

Does the wash sale rule apply to bitcoin? As of October 2026, generally no, because section 1091 covers only stock and securities. It does apply to crypto ETFs and tokenized securities.

Do I answer "Yes" to the digital asset question if I only bought crypto? No. The IRS says a taxpayer who only purchased digital assets with real currency checks "No." Any sale, swap, payment received in crypto or reward does.

Next Step

Madras Accountancy supports US businesses and CPA firms with bookkeeping, month-end close, tax preparation, audit support and CFO advisory, including subledger work for digital asset holdings. To discuss your crypto reporting process, contact our team.