Abstract

Insurance companies want to diversify their holdings to include cryptocurrencies. Under the principles of statutory accounting, cryptocurrencies should be cash or cash equivalents. Cash or cash equivalents are, by definition, admitted assets. When cryptocurrencies are adopted as admitted assets, auditors will face a dilemma. Current guidance suggesting treatment of cryptocurrencies as intangible assets results in misleading financial statements. Intangible assets are generally not depreciated or amortized, and are impaired without a corresponding mark to market. This results in a negative valuation feedback loop undermining the ability for an auditor to issue a non-qualified opinion since the cryptocurrencies’ fair market value would be materially misstated. Treating cryptocurrencies as tangible assets resolves the dilemma for both industry and the users of financial statements.

Keywords: Cryptocurrency, Financial statements, Intangible assets, Auditors