The EFRAG’s Discussion Paper (DP) encompasses a problem definition by providing an analysis of the crypto-ecosystem (economic characteristics, rights and obligations, and regulatory regimes) and an in-depth analysis of the current gaps in accounting requirements for both holders and issuers. As a way forward, the DP proposes three options for addressing IFRS related requirements, namely:

Option 1 - do nothing and rely on existing IFRS requirements

Option 2 - amend and/or clarify existing IFRS Standards

Option 3 - develop a new standard with explicit requirements for the accounting for crypto-assets (liabilities)

In response to EFRAG’s DP, we believe that the International Accounting Standards Board (IASB) should continue to monitor holders’ and issuers’ use of crypto-assets (liabilities). Whilst we consider Option 2 is the most suitable for the short to medium term, we believe that Option 3 may be the best way to address crypto-assets (liabilities) related accounting matters in the long term. Expanding on Options Two and Three, in our view, the IASB should develop an interim IFRS on the accounting for crypto-assets (liabilities) that would apply until the completion of a new standard. We note that the IASB followed a similar approach of developing and publishing an interim IFRS (IFRS 14 Regulatory Deferral Accounts) when working on the Rate-regulated Activities project in 2012.

The IFRS Interpretations Committee agenda decision Holdings of Cryptocurrencies does not address crypto-assets (liabilities) other than cryptocurrencies, which represent only one subset of crypto-assets. Further, the varying functional uses and diverse economic characteristics of crypto-assets make it difficult to come up with a single accounting treatment that is appropriate for all crypto-assets in all circumstances.

Monitoring and researching the ongoing developments in the crypto-ecosystem will allow the IASB to determine the most suitable accounting treatment of crypto-assets (liabilities) in the long term.