Crypto Accounting Best Practices for Small Businesses

1. Understanding Cryptocurrency

Cryptocurrencies are decentralized digital assets that utilize blockchain technology to gain transparency and security. Each cryptocurrency operates on a blockchain, which is a distributed ledger recorded on multiple computers in a way that makes it difficult to change, hack, or cheat the system. The decentralized nature of this technology means that cryptocurrencies operate independently of a central authority, like a government or bank.

2. Volatility and Valuation

Due to their speculative nature, cryptocurrencies can be highly volatile. For businesses, this means the value of assets can swing dramatically, which impacts financial reporting and planning. For accurate bookkeeping, it's essential to assess the value of your crypto assets consistently—typically, the value should be recorded in your accounting books at the time each transaction occurs, using the prevailing market rate.