Accounting for Cryptoassets: A Holder's Guide for Singapore (SFRS/IFRS & Tax)

Accounting for Cryptoassets: A Holder's Guide for Singapore (SFRS/IFRS & Tax) | Bestar

Singapore Crypto Accounting and Tax

Accounting for Cryptoassets: A Holder's Guide for Singapore (SFRS/IFRS & Tax)

The world of cryptoassets is dynamic, and navigating the accounting and tax implications in a financial hub like Singapore requires a clear understanding of the rules. For entities holding cryptocurrencies, there is no specific Singapore Financial Reporting Standard (SFRS) or International Financial Reporting Standard (IFRS).

Instead, you must apply judgment and draw analogies from existing standards based on the characteristics of the cryptoasset and the purpose for which it is held.

This guide simplifies the key accounting treatments and outlines the critical tax considerations for cryptoasset holders in Singapore.

1. Classification: What is Your Cryptoasset?

The first and most critical step is determining the nature of the cryptoasset, as this dictates the applicable accounting standard for a holder's perspective under SFRS (which is largely based on IFRS):

Scenario	Classification	Applicable Standard (SFRS/IFRS)	Key Measurement
Held for Sale in Ordinary Course of Business (e.g., a crypto broker-trader)	Inventories	IAS 2 / FRS 2 (Inventories)	Lower of Cost and Net Realisable Value OR Fair Value Less Costs to Sell (for commodity broker-traders)
Held for Investment or Long-Term Use (e.g., Bitcoin held by a company for capital appreciation)	Intangible Assets	IAS 38 / FRS 38 (Intangible Assets)	Cost Model: Cost less impairment (impairment tested annually). Revaluation Model: Fair Value (if an active market exists) with gains/losses primarily in Other Comprehensive Income (OCI), except to the extent they reverse a previous loss taken to P&L.
Derivative Contract (e.g., futures, options)	Financial Instrument	IFRS 9 / FRS 109 (Financial Instruments)	Fair Value Through Profit or Loss (FVTPL)

💡 Note on Cash: Cryptocurrencies are generally not considered cash or cash equivalents under IAS 7/FRS 7 because they are not legal tender and are subject to significant volatility, meaning they are not readily convertible to a known amount of cash with insignificant risk of changes in value.

2. Initial and Subsequent Measurement

Once classified, the holder must apply the measurement principles of the chosen standard:

A. Intangible Assets (IAS 38 / FRS 38)

• Initial Recognition: Measured at cost.

  
  

• Subsequent Measurement: You must choose either the Cost Model or the Revaluation Model for the entire class of similar intangible assets:

  
  

  • Cost Model: Carry at cost less any accumulated impairment losses. Crucially, if the fair value increases, this gain is not recognised, but you must check for impairment annually.

  • Revaluation Model: Carry at a revalued amount, being its fair value at the date of the revaluation, provided an active market exists.

    • Revaluation Gain: Recognised in Other Comprehensive Income (OCI), unless it reverses a previous impairment loss taken to Profit or Loss (P&L), in which case it goes to P&L.

    • Revaluation Loss: Recognised in P&L, unless it reverses a previous revaluation gain held in OCI, in which case it reduces the OCI reserve.

B. Inventories (IAS 2 / FRS 2)

• General Rule: Measured at the lower of cost and net realisable value.

  
  

• Broker-Traders: If the cryptoassets are acquired principally for selling in the near future and generating a profit from fluctuations in price or margin, they can be measured at Fair Value Less Costs to Sell, with changes in fair value recognised in P&L.

3. Essential Disclosure Requirements

Given the complexity and volatility, holders of cryptoassets should provide extensive disclosures under IAS 1 / FRS 1 (Presentation of Financial Statements) to ensure the financial statements are useful to users. These may include:

• The accounting policy chosen (e.g., IAS 38 Cost Model).

  
  

• A description of the cryptoassets, the purpose for holding them, and how the assets fit into the entity's business model.

  
  

• The carrying amount of the assets and the methods used to determine their fair value.

  
  

• Significant risks associated with the cryptoassets (e.g., market volatility, custody risks).

4. 🇸🇬 Tax Implications from the Inland Revenue Authority of Singapore (IRAS)

For cryptoasset holders in Singapore, the tax treatment generally depends on the nature of the activity and whether the gains are considered capital or income.

A. Capital Gains vs. Income

• No Capital Gains Tax: Singapore generally does not impose a capital gains tax on individuals or corporations. If a cryptoasset is held as a long-term investment (a capital asset), any profit upon disposal (selling, trading, or using it) is generally not taxable.

  
  

• Taxable as Business Income: If the crypto-related activities are carried on in the nature of trade (e.g., frequent, systematic, and commercially organised trading with a profit motive), the profits are considered business income and are subject to Singapore's Income Tax.

B. Other Taxable Activities

• Mining Rewards: Taxable as business income if carried out in a systematic and habitual manner for profit.

  
  

• Staking/Lending Rewards: Rewards (interest/fees) received from staking or lending are generally taxable as income.

  
  

• Payment for Goods/Services: If crypto is received as payment for goods or services rendered by an individual or business, the fair market value of the crypto in SGD at the time of receipt is considered taxable income.

C. Goods and Services Tax (GST)

• The supply of Digital Payment Tokens (DPTs) and the use of DPTs as payment for goods and services are generally exempt from GST (treating them similarly to money).

  
  

• However, fees charged by a GST-registered local crypto service provider (like an exchange or custodian) may still be subject to GST.

Key Takeaway for Holders in Singapore

Proper accounting and tax compliance hinges on correctly classifying your cryptoassets.

1. Determine Intent: Are you an investor (Intangible Asset) or a trader (Inventory)? This decides your accounting standard and tax liability.

   
   

2. Maintain Records: Keep meticulous records of all transactions, including dates, amounts, SGD fair market value at the time of transaction, and the purpose of the holding.

Given the evolving nature of crypto regulations, seeking advice from a professional accountant specialising in digital assets in Singapore is highly recommended for accurate compliance.

Accounting Treatment for a Specific Type of Crypto-Asset, such as NFTs or Stablecoins

While the general guidance of applying IAS 38 (Intangible Assets) or IAS 2 (Inventories) applies to most cryptoassets, Non-Fungible Tokens (NFTs) and Stablecoins present unique characteristics that necessitate a more nuanced application of Singapore Financial Reporting Standards (SFRS/IFRS).

Here is a breakdown of the specific accounting treatments for holders of NFTs and Stablecoins in Singapore.

1. Accounting for Non-Fungible Tokens (NFTs)

NFTs are fundamentally unique and non-interchangeable. This non-fungible nature is key to their accounting classification.

Classification is Key: IAS 38 is the Default

Since an NFT is an identifiable non-monetary asset without physical substance, it generally falls under the definition of an Intangible Asset under IAS 38 / FRS 38.

Purpose of Holding	Classification (SFRS/IFRS)	Rationale
Held for Investment / Collection	Intangible Asset (IAS 38)	The NFT represents a unique digital asset (e.g., digital art, collectible) held for its potential capital appreciation or intrinsic/cultural value.
Held for Resale in Ordinary Course of Business	Inventory (IAS 2)	Applicable if the entity's primary business is actively buying and selling NFTs to generate profit from short-term price fluctuations (e.g., a dedicated NFT trader).

Measurement Challenges for Intangible Assets

For NFTs classified under IAS 38:

1. Initial Recognition: Measured at Cost.

   
   

2. Subsequent Measurement:

   
   

   • Useful Life: NFTs are typically considered to have an indefinite useful life because the digital asset (the token and the rights it represents) generally lasts as long as the underlying blockchain exists and is not subject to a foreseeable limit on the period over which it is expected to generate net cash inflows.

   • Amortisation: An intangible asset with an indefinite useful life is not amortised.

   • Impairment: It must be tested for impairment annually (or more frequently if impairment indicators exist). The impairment loss must be recognised in the Profit or Loss (P&L).

   • Revaluation Model: Applying the Revaluation Model (recognising gains/losses in OCI) requires an Active Market. Due to the unique nature of each NFT, an active market (where prices are available to the public and transactions occur with sufficient frequency and volume) is unlikely to exist for most specific NFTs. Therefore, the Cost Model is the most common approach.

💡 Practical Impact: If you hold an NFT under the Cost Model, you recognise its initial cost and must recognise a loss if its value falls below cost (impairment), but you cannot recognise a gain if its value increases, until it is actually sold.

2. Accounting for Stablecoins

Stablecoins are designed to maintain a stable value, typically pegged 1:1 to a fiat currency (like USD). Their accounting treatment hinges on whether they grant the holder a contractual right to fiat currency.

Stablecoin Type	Classification (SFRS/IFRS)	Rationale & Measurement
Fiat-Backed Stablecoins (e.g., USDC, USDT, with explicit redemption rights)	Financial Asset (IFRS 9 / FRS 109)	If the stablecoin contract gives the holder an unconditional contractual right to receive a fixed amount of cash (e.g., redeeming 1 stablecoin for 1 USD from the issuer), it meets the definition of a financial asset. It is typically measured at Amortised Cost or Fair Value Through P&L (FVTPL), depending on the holder's business model.
Algorithmic/Crypto-Collateralised Stablecoins (without a direct, unconditional redemption right for fiat)	Intangible Asset (IAS 38)	If the holder does not have a clear, unconditional contractual right to receive a fixed amount of fiat currency from an identifiable counterparty, the asset fails the financial asset definition and reverts to the default classification of an Intangible Asset.
Cash Equivalent (IAS 7 / FRS 7)	Highly Unlikely	Stablecoins generally do not meet the strict definition of cash or cash equivalents because they are not legal tender, and even fiat-backed ones carry a small but significant credit risk (the risk that the issuer's reserves fail or they default on redemption). They should be presented separately on the balance sheet.

Measurement for Fiat-Backed Stablecoins (as Financial Assets)

For a fiat-backed stablecoin deemed a Financial Asset under IFRS 9:

• Initial Measurement: Fair value plus transaction costs (if Amortised Cost model is used).

• Subsequent Measurement: If the asset is held primarily to collect contractual cash flows (the redemption right), it is measured at Amortised Cost. Since the redemption value is fixed (1:1), the amortised cost will remain effectively 1 (subject to any foreign currency translation if the functional currency is not the pegged currency).

Next Step

The most challenging area is usually the custody of the assets—determining if a third-party exchange or custodian arrangement affects the legal ownership and, consequently, the accounting classification.

Accounting Implications of Holding Assets through a Custodial Arrangement (e.g., on a Crypto Exchange)

This is a critical area of accounting for cryptoasset holders, as the custodial arrangement can fundamentally change what asset the holder legally possesses. The accounting treatment for assets held on a crypto exchange depends entirely on the substance of the arrangement and whether the entity retains direct control and legal ownership.

Under Singapore Financial Reporting Standards (SFRS/IFRS), the key question is: Do you own the digital asset itself, or do you own a claim against the custodian for the digital asset?

The Key Distinction: Non-Custodial vs. Custodial Holdings

1. Non-Custodial (Self-Custody)

• Holding: The holder (you/your entity) directly owns the cryptoasset and controls the private keys.

  
  

• Accounting Treatment: The rules discussed previously apply directly: The cryptoasset is accounted for as an Intangible Asset (IAS 38) or Inventory (IAS 2), depending on the purpose.

2. Custodial (Held on an Exchange/by a Third-Party)

• Holding: Your cryptoassets are held in a wallet controlled by a third party (the exchange or custodian).

  
  

• Legal Ownership/Control: This is where complexity arises.

  
  

  • Commingling Risk: If the custodian pools or commingles your assets with those of other clients in a shared wallet (which is common for exchanges), you often lose direct legal ownership of the specific digital asset units.

  • The Claim: Instead of holding the cryptoasset itself, you acquire a contractual right—a chose in action—to claim the equivalent amount of cryptoassets (or cash equivalent) from the custodian.

Accounting Implication: Financial Asset vs. Intangible Asset

If a holder's right becomes a claim against the custodian, the asset's classification shifts from a non-monetary asset (like an Intangible Asset) to a Financial Asset.

Aspect	Direct Holding (Intangible Asset - IAS 38)	Custodial Holding (Potential Financial Asset - IFRS 9)
Asset Held	The actual cryptoasset (e.g., the specific units of BTC).	A contractual right to receive cryptoassets from the custodian.
Applicable Standard	IAS 38 (Intangible Assets)	IFRS 9 (Financial Instruments)
Subsequent Measurement	Cost less Impairment (no recognition of unrealized gains).	Amortised Cost or Fair Value Through Profit or Loss (FVTPL).
Risk Exposure	Market Risk and Technology Risk (loss of keys).	Credit Risk/Counterparty Risk (custodian failure) in addition to market risk.

The Singapore Legal View (Chose in Action)

Recent landmark Singapore High Court rulings (e.g., ByBit Fintech Ltd v Ho Kai Xin) have recognized cryptoassets as a form of property, specifically an intangible proprietary right or a chose in action (a right enforceable in court).

If the custodial agreement makes your holding a claim against the custodian (a right to demand the return of the asset), this strongly supports the classification of the holding as a Financial Asset under IFRS 9.

The Custodian's Risk and Disclosure

When assets are held by a custodian, two major factors must be considered:

Factor	Description	Accounting Action Required from Holder
1. Credit/Counterparty Risk	The holder is exposed to the risk that the exchange/custodian may become insolvent or misuse the commingled funds, preventing the holder from recovering their cryptoassets.	This risk must be evaluated for impairment under IFRS 9. If the custodian's financial health deteriorates, the value of the contractual claim against them may need to be written down (impaired).
2. Disclosure	The holder must provide sufficient information to users of the financial statements to understand the nature and extent of the risks involved.	Required Disclosure: Detail the nature of the custodial arrangement, the risks associated with holding assets with that specific counterparty, and the legal implications regarding ownership and segregation of funds (IAS 1).

Summary of Custody Accounting for the Holder

For a company reporting under SFRS/IFRS, the process is:

1. Read the Custody Agreement: Determine if you retain exclusive control of the private keys (Intangible Asset) or if you have only a contractual claim against the custodian (Financial Asset).

   
   

2. Apply IFRS 9 (If Financial Asset): If you have a claim against the exchange, the holding is likely a financial asset. It would typically be measured at FVTPL if held for trading, or potentially Amortised Cost if the claim is legally sound and redemption is certain.

   
   

3. Monitor Credit Risk: Regularly assess the creditworthiness of the custodian and recognise any impairment on the claim if their financial condition declines.

This entire framework relies heavily on judgment and the specific, often complex, legal terms governing the relationship between the holder and the crypto-exchange.

Navigating the Crypto Maze: How Bestar Singapore Can Simplify Accounting for Cryptoassets

Accounting for Cryptoassets: A Holder's Guide for Singapore (SFRS/IFRS & Tax)

The world of cryptoassets—from Bitcoin to NFTs—presents a complex puzzle for businesses and investors in Singapore. With no single dedicated SFRS/IFRS standard, accounting and tax compliance rely heavily on expert judgment, precise classification, and meticulous record-keeping.

As a trusted financial services provider in Singapore, Bestar Singapore is strategically positioned to help crypto holders navigate these challenges, ensuring compliance with both Singapore Financial Reporting Standards (SFRS/IFRS) and IRAS tax regulations.

1. Establishing the Correct Accounting Policy (SFRS/IFRS)

The fundamental challenge in crypto accounting is determining if your asset is an Intangible Asset (IAS 38), Inventory (IAS 2), or a Financial Asset (IFRS 9). Bestar provides the expertise to establish the legally sound and auditable policy based on your unique operations:

Challenge Area	How Bestar Singapore Helps	Accounting Standard Secured
Asset Classification	Analyzing the purpose, nature (fungible/non-fungible), and holding period of each crypto asset (e.g., BTC, ETH, Stablecoins, NFTs) to ensure correct SFRS classification.	IAS 38, IAS 2, IFRS 9
Measurement Model Choice	Advising on the strategic choice between the Cost Model (e.g., for most NFTs or long-term Intangible Assets) or the Revaluation Model (where an active market exists) to manage financial statement volatility.	IAS 38, IFRS 13
Custody Assessment	Scrutinizing custodian/exchange agreements to determine if you hold the asset (Intangible) or a contractual claim against the custodian (Financial Asset), which fundamentally changes the required accounting.	IFRS 9, IAS 38
Impairment Testing	Performing the annual impairment test for cryptoassets carried under the Cost Model, especially relevant for non-traded or illiquid crypto holdings (like many NFTs).	IAS 38, IAS 36

2. Ensuring IRAS Tax Compliance & Optimisation

Singapore's tax system is generally favourable (no Capital Gains Tax), but the line between tax-free capital gains and taxable business income is where most risk lies. Bestar's tax specialists help you navigate this grey area:

• Income vs. Capital Assessment: They review the frequency, volume, and systematisation of your crypto activities (e.g., trading, staking, mining) to provide a clear, defensible assessment of whether your gains are likely to be classified as non-taxable Capital Gains or taxable Business Income by IRAS.

  
  

• Taxable Event Tracking: Expertly tracking and calculating the taxable value (in SGD) of income-generating activities such as:

  
  

  • Rewards from Staking and Lending.

  • Profits from high-frequency Trading.

  • Income received from Mining operations (if deemed a business).

    
    

• Goods and Services Tax (GST) Advisory: Guiding you on the application of GST on transaction fees and the exemption for Digital Payment Tokens (DPTs), ensuring you correctly manage GST input tax claims and outputs.

3. Comprehensive Record-Keeping and Disclosure

The complexity of crypto accounting demands robust, auditable records that go beyond standard accounting practices.

• Meticulous Bookkeeping: Integrating crypto transactions from various wallets and exchanges into your general ledger, tracking the specific Cost Basis (using FIFO or other methods) required for tax and financial reporting.

  
  

• Enhanced Disclosure: Preparing the necessary financial statement disclosures required by IAS 1/FRS 1 to explain the classification, measurement methods, and significant market and counterparty risks associated with your crypto holdings—a non-negotiable step for audit readiness.

  
  

• Audit Support: For entities requiring a statutory audit, Bestar’s deep experience in financial advisory services ensures all crypto-related policies, records, and valuations can withstand auditor scrutiny.

Partner with Bestar for Crypto Confidence

Cryptoassets should be a strategic opportunity, not a source of accounting and tax risk. By leveraging Bestar Singapore's comprehensive financial advisory, accounting, and tax compliance services, your company can achieve:

1. Regulatory Certainty: Assurance that your financial statements meet SFRS/IFRS standards.

   
   

2. Tax Efficiency: Confidence that your tax position aligns with IRAS guidelines, avoiding penalties and leveraging Singapore’s tax-friendly environment.

   
   

3. Audit Readiness: Prepared systems and documentation to smoothly navigate mandatory audits.

Ready to secure your crypto accounting and tax compliance in Singapore?

To request a consultation on your cryptoasset accounting needs, contact Bestar.