Chart of accounts for crypto activities

Why is it necessary to design chart of accounts for crypto activities?

Different types of crypto assets have different purposes for holding and value sources, and need to be measured according to different accounting standards. Crypto assets that meet the definition of accounting standards can be measured at fair value and shown separately in the balance sheet from other intangible assets. However, crypto assets that do not meet the definition of standards, such as NTFs and Pre-ICO investments, require different accounting treatments according to other standard provisions. Therefore, these assets need to have their own accounting subjects.

Trading and holding crypto assets may generate different types of income and expenses, such as gas fees and airdrops. Setting up separate income and expense accounting subjects helps identify and report income and expenses related to cryptographic activities more clearly.

COA in Elven

In crypto business activities, the chart of accounts involved usually include:

Explanation of COA

Unrestricted crypto assets To differentiate between restricted crypto assets (such as those involved in DeFi protocols) and regular crypto assets, we utilize the Unrestricted Crypto Assets account to record regular crypto assets.

For instance, if you purchase crypto assets with fiat currency on an exchange, the entry recorded in Elven would be as follows:

Debit	Unrestricted crypto assets
Credit		Cash and cash equivalents

Crypto assets restricted by staking protocols / Crypto assets restricted by liquidity providing protoclos / Crypto assets restricted by farming protocols / Crypto assets restricted by lender / Crypto assets restricted by custodians / Crypto assets restricted by locking protocols

In Elven, those accounts allow us to clearly differentiate between crypto assets subjected to various restrictions from different DeFi protocols, contractual agreements, and so forth.

For instance, the entry recorded in Elven for staking would be as follows:

Debit	Crypto assets restricted by staking protocols
Credit		Unrestricted crypto assets

Crypto borrowings

Loans taken out in crypto assets, or crypto assets borrowed through DeFi protocols, are registered under this account.

For instance, if you borrow crypto assets, the entry recorded in Elven would be as follows:

Debit	Unrestricted crypto assets
Credit		Crypto borrowings

Deposit from customers

If you are operating a crypto asset deposit business as a platform, this account is used to register the liabilities corresponding to user deposits.

For instance, when a user deposits crypto assets, the entry recorded in Elven would be as follows:

Debit	Unrestricted crypto assets
Credit		Deposit from customers

Owner's equity

When shareholders make capital contributions in the form of crypto assets, we record the corresponding shareholders' equity under this account.

For instance, when a shareholder invests crypto assets, the entry recorded in Elven would be as follows:

Debit	Unrestricted crypto assets
Credit		Owner's equity

Commissions income / DAO incentive income / Sponsorship income / Mint income

In Elven, income resulting from various crypto business operations is recorded in the corresponding income accounts, allowing for a clearer identification of income sources.

For instance, when receiving incentive income from a DAO, the entry recorded in Elven would be as follows:

Debit	Unrestricted crypto assets
Credit		DAO incentive income

Payroll and staff related costs / Research and development / Software & web services / Miscellaneous operating expenses / Marketing expense / Interest expense

In Elven, paying expenses with crypto assets can be distinctly separated into various expense accounts.

For instance, when paying wages with crypto assets, the entry recorded in Elven would be as follows:

Debit	Payroll and staff related costs
Credit		Unrestricted crypto assets

Transaction cost

Transaction-related fees, including gas fees, are recorded under this account.

For instance, when paying gas fees in a crypto transaction, the entry recorded in Elven would be as follows:

Debit	Transaction cost
Credit		Unrestricted crypto assets

Interest income / Dividends income / Staking rewards / LP staking rewards / Farming rewards

Income resulting from investment activities performed with crypto assets is recorded under these accounts, allowing for the classification of investment income according to different types of investments.

For instance, when receiving staking rewards, the entry recorded in Elven would be as follows:

Debit	Unrestricted crypto assets
Credit		Staking rewards

Airdrop / Hard fork / Chain split / Grant income

Income from crypto activities outside of business operations, such as airdrops and hard forks, will be accurately recorded in the respective income accounts.

For instance, when receiving income from an airdrop, the entry recorded in Elven would be as follows:

Debit	Unrestricted crypto assets
Credit		Airdrop

Hacked / Lost / stolen

When there are losses due to hacking attacks, loss, theft, etc., these losses can be recorded on these expense accounts.

For instance, if a hacking attack results in a loss of crypto assets, the entry recorded in Elven would be as follows:

Debit	Hacked
Credit		Unrestricted crypto assets

Gain (Loss) on crypto activities

This account is used to record realized gains or losses from the disposal of crypto assets.

Unrealized gain (loss) - crypto fair value measurement

This account is used to record unrealized gains/losses from holding crypto assets.

Fiat exchange gain (loss)

This account is used to record gains/losses due to exchange rate changes.