Companies engaged in crypto asset trading that are publicly traded in the United States currently report their revenue from trading in crypto assets on a gross basis, under both IFRS and US GAAP. This reporting stems from the accounting principle of control over assets, which has been adopted in both Frameworks as the basis for distinguishing between gross reporting (principal) and net reporting (agent). Crypto industry companies argue that this form of reporting leads to inflated revenue and cost of sales, resulting in minimal gross profit margins that completely contradict their business model, which generates profit from fees and spreads. To prevent loss of relevance to the point of misleading investors, we believe that global standard-setting bodies should amend the rules on this matter, similar to the intervention implemented approximately a year and a half ago in the United States (and, we believe, should be implemented in IFRS as well) regarding the measurement of crypto assets themselves.
Recent developments have led to an increasing number of crypto companies listing on major global exchanges that enable their customers to trade crypto assets through their platforms. In most cases, the crypto company serves as a counterparty to the customer and is effectively the entity that provides the crypto assets. The crypto company’s role in the transaction can be executed in several ways. For example, purchasing crypto assets from another customer who entered, at or around the same time, into a sales transaction with the company (i.e., a customer who wishes to close its position on the platform). Additional methods include using their own inventory held for this purpose (nostro) or purchasing from a liquidity provider that the company works with. In each case, the crypto company charges a fee/spread that is its source of profit from the transaction.
A crucial accounting question for these companies concerns the manner of reporting this activity in the statement of profit or loss. The revenue recognition standard in US GAAP (ASC 606) and its counterpart in IFRS (IFRS 15), which are essentially identical, establish principles for identifying whether a company acts as a principal and should therefore present revenue on a gross basis, or as an agent and should therefore present revenue on a net basis.
The determination of whether revenue should be reported gross is made primarily based on a core principle, which is the question of control over the asset or service before its transfer to the customer. Control means, among other things, the company’s ability to direct the use of the product or service prior to its delivery to the customer. Additionally, the standards offer several indicators for control, such as whether the company is primarily responsible for providing the product or service to the customer, whether the company bears inventory risk before transferring the product or service to the customer, and whether the company has discretion in setting the price to the customer.
Going Gross
Applying these guidelines to such transactions in current practice, primarily in US-listed companies (whether they report under US GAAP or IFRS), leads the crypto companies to determine that they are the principal in the transaction. The consequence is gross revenue reporting, where the profitability ratios presented to investors are very low, which makes it difficult for companies to present their business story within their audited financial statements.
It should be mentioned that there are companies such as Coinbase Global Inc. and Robinhood Markets Inc., that also offer their customers crypto assets trading, but in a different business model. Unlike companies that serve as counterparties in transactions, this business model is more similar to exchange activity: customers trade directly with each other, while the company provides matching services. Accordingly, these companies report their revenue in financial statements on a net basis.
If we examine companies that report gross as mentioned, we can see, for example, the recent example of Bullish, which reports under IFRS and completed its IPO process in the United States last month. In Bullish’s 2024 financial statements, revenue of $250.2 billion was recorded from crypto assets, against costs of $250.1 billion. Another example can be seen in Block Inc.’s financial statements (prepared under US GAAP) that recorded revenue of $10.2 billion in 2024 against costs of $9.9 billion.
In the following table, one can see the total gross revenue, the direct profitability inherent in the transactions (which essentially represents net revenue) and the gross profitability ratio. Simple analysis shows that despite the very high gross revenue from crypto asset transactions, the contribution to direct profitability is almost nil and reaches in Bullish, for example, only about 0.04 percent! This unusual situation becomes even more pronounced when considering that these companies sometimes have additional significant revenue sources. In such situations, revenue from crypto assets may constitute the majority of the company’s revenue, while the contribution to overall profitability is minor.
It is worth mentioning that Block Inc.’s overall gross profit margin was 37% in 2024. However, while revenue from crypto assets contributed 42% of the company’s total revenue, the contribution to gross profitability was only 2.83%. This disparity indicates that the crypto asset segment generates high revenue but contributes virtually nothing to profitability, suggesting that the presentation method distorts the company’s true economic picture.
It should be noted that one of the issues raised in the FASB’s 2025 request for public comments regarding future standard-setting issues was the principal versus agent model. In responses submitted by crypto asset companies, a similar message was repeated: gross presentation inflates the statement of profit or loss and does not reflect the true economics of the transactions to a level that could even mislead users of financial statements!
The main argument in these responses was that economically, crypto companies actually profit from fees and spreads rather than from the total volume of transaction amounts. The bottom line was that crypto companies called on the FASB to update accounting rules so that financial statements would present net revenue, similar to reporting by a broker, to properly reflect business reality.
IFRS is Required to Move on to a Relevant Measurement Basis
Existing accounting rules, including the revenue recognition standards that were published only a decade ago, were not meant to deal with the unique characteristics of crypto companies. This can be clearly seen in the measurement basis of crypto assets in the statement of financial position: as is well known, crypto assets are typically classified under both IFRS and US GAAP as intangible assets, while under IFRS crypto assets can be considered as inventory if they are held for sale in the ordinary course of business.
When crypto assets are classified as intangible assets, they are measured under IFRS according to the cost model or, alternatively, under the revaluation model where changes in fair value are recognized in other comprehensive income. In contrast, under US GAAP, following a substantive amendment published at the end of 2023 and effective from 2025, with the option for early adoption, crypto assets are measured at fair value through profit or loss.
Beyond the expectation that IFRS will make a similar adjustment to the measurement basis to maintain relevance, we believe that a correction to existing standards is also required in the context of the gross-net issue. It appears that the principal-agent model that exists in both revenue recognition standards does not properly reflect the economic substance of companies operating in this field. As mentioned, the issue stems primarily from the fact that the standards were published in a period that preceded the significant development of the crypto asset industry.
The source of the problem in current accounting standards is that although crypto assets often function in practice like financial instruments, the accounting standards do not define them as such – which was part of the reason for the FASB issuing an amendment regarding the measurement basis of crypto assets.
Both Standards Need to Move on to Net Reporting
Without considering the question of whether this is a sufficiently unique industry that requires the development of a new dedicated standard, our starting point should be that crypto assets are in most cases held as an investment instrument, similar to investing in financial instruments. As a result, we believe that the scope of the financial instrument standards should be extended to include crypto assets as well. Accordingly, investments in crypto assets that are held for investment and/or trading purposes should be accounted for as financial instruments measured at fair value through profit or loss.
This amendment should explicitly state that crypto assets are outside the scope of IFRS 15. In addition, it should be clarified, mainly under US GAAP, that gains/losses are required to be presented on a net basis just like financial institutions, such as banks, underwriters and investment banks, present gains/losses from securities on a net basis (both under IFRS and US GAAP).
The bottom line is that in order to address the distortion created, the accounting treatment of crypto assets must be removed from the revenue recognition standards. Instead, crypto assets should be defined as financial instruments. This accounting change will lead to a more faithful and relevant presentation of the business results of companies operating in the crypto industry, whose presence on leading global exchanges has been expanding in recent years.
(*)This paper was co-authored by Shlomi Shuv and Eyal Ruff, Partner at the Professional Practice Department, EY