Valuing and accounting for cryptocurrency assets and liabilities


In the past five years, cryptocurrency has gone from a rare and seldom-used form of currency to a headline-grabbing monetary instrument that has the potential to change the way business is conducted. Misunderstood and often misvalued, cryptocurrency has been the cause of major and minor financial frauds and the collapse of financial institutions trading, or even just holding, cryptocurrency.

Most recently, several prominent banks have announced they are closing shop after experiencing losses directly or indirectly related to the cryptocurrency industry. Silvergate Bank bet heavily on the cryptocurrency industry, eventually becoming known as the “Crypto Bank” and dependent largely on its digital asset deposits. When FTX, the crypto exchange and an important client of the bank, collapsed last November due, in part, to a massive misvaluation of crypto assets, Silvergate found itself facing a bank run. To make matters worse, because of rising interest rates, the bank was forced to liquidate, at a loss, securities held as reserves to fulfill the influx of withdrawals.

When failures…

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