Crypto Assets

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Crypto Assets

Crypto Assets have evolved from a niche market into a significant business and risk area for financial service providers. Trading, custody, tokenization, and crypto funds are opening up new sources of revenue—while at the same time, requirements for supervision, IT security, anti-money laundering, accounting, and reporting are increasing.

With MiCAR (Markets in Crypto-Assets Regulation) and KMAG (Act on the Supervision of Markets for Crypto Assets), activities in the crypto sector are now uniformly regulated. Institutions, issuers, and service providers across the EU must align their business models, processes, and accounting approaches at an early stage in order to capitalize on opportunities and avoid regulatory risks.

Term definitions relating to Crypto Assets

Crypto-Assets

are digital assets that are typically based on distributed ledger technology (particularly blockchain) and whose value is largely determined by supply and demand.

Cryptocurrencies / Payment Tokens

Blockchain-native, decentralized, exclusively digital, with no claim against an issuer, and global transactions that are, in principle, irreversible.

Tokens

are issued on existing networks and can represent payment, ownership, or usage rights (including security and utility tokens, among others).

Validation mechanisms

Processes such as mining, minting, and staking secure the network and regulate the creation of new coins or tokens—which are associated with specific technical, operational, and compliance risks.

What regulatory framework should be taken into account with regard to crypto assets?

Since the introduction of Bitcoin, crypto markets and regulation have evolved gradually, including through G20 discussions, Financial Action Task Force (FATF) documents, publications by the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA), as well as the extension of EU regulations on combating money laundering and terrorist financing to crypto providers. In Germany, the KWG, BGB, FinDAG, and VAG, among others, were amended as part of the implementation process.

MiCAR and the German KMAG further clarify the regulatory framework. MiCAR specifically regulates the issuance of crypto-assets, requirements for asset-referenced tokens and e-money tokens, the authorization and supervision of crypto-asset service providers (CASPs), market abuse, and supervisory and sanctioning powers.

Crypto-Asset Service Providers (CASPs)

Crypto-asset service providers (CASPs) provide operational services related to trading, custody, brokerage, advisory services, and portfolio management of crypto-assets. These include, among other things, the custody and management of crypto assets for clients, the operation of trading platforms, crypto-to-fiat and crypto-to-crypto exchanges, the execution, acceptance, and transmission of orders, placement, advisory services, portfolio management, and transfer services.

Crypto-Asset Issuers (CAIs)

Crypto-asset issuers (CAIs) publicly offer crypto-assets or apply for their admission to trading and are subject to whitepaper and disclosure requirements, with specific requirements for asset-referenced tokens, e-money tokens, and utility tokens. Already today, crypto-securities registrars, crypto-custodians, and crypto-asset service providers, among others, are regulated by BaFin.

MiCAR and KMAG establish a uniform EU framework of obligations for crypto-asset service providers:

Customer and market behavior

1/4

The duty to act in good faith in the customer’s best interests, to provide clear information and risk disclosures (including the risk of total loss), to ensure transparent prices and fees, and to take measures against market abuse.

Admission & Organization

2/4

CASPs require a MiCAR license and must have appropriate governance, internal controls, risk management, and robust IT and emergency procedures in place.

Complaints, Outsourcing, Processing

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Guidelines on complaint procedures, handling conflicts of interest, outsourcing, and the orderly winding down of a CASP.

Client Assets

4/4

Strict separation of proprietary and client assets, secure custody of crypto assets and client funds, and protection of property rights even in the event of insolvency.

CASPs require a MiCAR license and must have appropriate governance, internal controls, risk management, and robust IT and emergency procedures in place.

Guidelines on complaint procedures, handling conflicts of interest, outsourcing, and the orderly winding down of a CASP.

Strict separation of proprietary and client assets, secure custody of crypto assets and client funds, and protection of property rights even in the event of insolvency.

How should crypto assets be accounted for under the German Commercial Code (HGB) and International Financial Reporting Standards (IFRS)?

The accounting treatment of crypto-assets depends, on the one hand, on the type of token and the intention to hold it; on the other hand, institution-specific considerations may also arise from specific regulations (RechKredV, KAGB). Depending on the business model, complex accounting issues may arise.

HGB

Payment tokens: Generally not financial instruments or means of payment; often classified as other assets or intangible assets (fixed or current assets; strict lower-of-cost-or-market principle applies to current assets).
Investment / Security Tokens: Depending on their structure and intended holding period, e.g., as bonds, stocks/other securities, equity interests, or receivables, including the specific provisions of Sections 340 et seq. of the German Commercial Code (HGB) and the Accounting and Credit Regulation (RechKredV), as well as their classification as financial instruments in accordance with IDW RS BFA 2, as amended, for financial institutions.

IFRS

Payment tokens: Primarily recognized as intangible assets under IAS 38; if held for trading, they may be recognized as inventory under IAS 2 (“lower of cost or net realizable value”).
Security tokens: Financial instruments are recognized regularly in accordance with IAS 32 and measured in accordance with IFRS 9 (often at fair value through profit or loss).
Disclosures: IFRS requires additional disclosures (risks, measurement methods, market price risks). IFRIC emphasizes additional disclosure requirements in IAS 1.

Our Consulting Services regarding Crypto Assets

WTS Advisory supports institutions, issuers, and service providers across the entire Crypto Asset value chain - from regulatory classification and licensing to accounting and reporting, as well as compliance, governance, and training:

Training

Updates on regulations, crypto topics, and market trends
Training sessions for executive management, compliance, finance, risk, and operational departments
Workshops on MiCAR, KMAG, token classification, custody, accounting, and reporting

Compliance & Governance

Design and further development of compliance, AML, governance, and control structures
Definition of roles, responsibilities, policies, and internal controls
Establishment of risk management processes and monitoring of regulatory requirements

Accounting & Financial Reporting

Accounting, valuation, and disclosure of crypto-assets in accordance with the German Commercial Code (HGB), the German Accounting and Credit Reporting Regulation (RechKredV), the German Capital Investment Code (KAGB), and IFRS
Determination of appropriate accounting and valuation methods
Support with financial statements as well as audit and reconciliation processes

Reporting & Regulatory Processes

Development, optimization, and automation of regulatory reporting processes and reporting tools
Preparation, quality assurance, and submission of regulatory reports
Assistance with audit inquiries and communication with regulatory authorities

Michèle Färber

Partner Advisory

München

+49 170 2053099

Michele.Faerber@wts.de

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Crypto Assets

Term definitions relating to Crypto Assets

What regulatory framework should be taken into account with regard to crypto assets?

Crypto-Asset Service Providers (CASPs)

Crypto-Asset Issuers (CAIs)

MiCAR and KMAG establish a uniform EU framework of obligations for crypto-asset service providers:

Customer and market behavior

Admission & Organization

Complaints, Outsourcing, Processing

Client Assets

How should crypto assets be accounted for under the German Commercial Code (HGB) and International Financial Reporting Standards (IFRS)?

HGB

IFRS

Our Consulting Services regarding Crypto Assets

Training

Compliance & Governance

Accounting & Financial Reporting

Reporting & Regulatory Processes

Michèle Färber

Other topics that might interest you

Valuation of Derivatives and Financial Instruments

Risk Mitigation Accounting

Hedge Accounting

ESG in the financial sector

Contact us today