Valuation Methods for Virtual Assets

The world of virtual assets is rapidly evolving. For fintech companies and startups dealing with tokens, stable-coins, or other crypto-instruments, determining how to value these assets is becoming a core accounting issue. But the challenge isn’t just the volatility of markets. It lies in applying the correct measurement basis under IFRS Accounting Standards and understanding how your business model and asset characteristics shape that choice.

This article outlines the key valuation methods for virtual assets, the accounting standards you should align with, and practical implications for regulated fintechs operating under jurisdictions such as the Dubai Financial Services Authority (DFSA) or the Financial Services Regulatory Authority (FSRA) in the UAE.

- By Arnulfo Relampagos, Audit & Accounting Specialist

1. Identify the nature of the virtual asset and the business model

Before choosing a valuation method, you must understand:

What type of asset you hold. Does it qualify as a financial instrument, an intangible asset, inventory or something else under IFRS? For example, the IFRS Interpretations Committee Agenda Decision concluded that holdings of cryptocurrencies by a holder generally do not meet the definition of a financial instrument under IAS 32.
How the asset is used or held. Is it held for sale in the ordinary course of business (inventory)? Or is it held for long-term investment or utility (intangible)? For crypto held by brokers for trading, IAS 2 may apply; otherwise IAS 38 is likely to apply.
Whether an active market exists for the asset. That influences whether you can apply a revaluation model under IAS 38 or whether cost model is mandatory.

In a fintech context, for example a tokenised service-platform or utility token, the entity must evaluate rights, restrictiveness of transfers, whether tokens give residual interest or cash‐flows, and where the token sits in your business model.

2. Initial recognition – cost basis

When first recognised, virtual assets are typically measured at cost. Under IAS 38, cost is defined as the amount of cash or cash equivalents paid or fair value of other consideration given.

If the asset is inventory under IAS 2 (held for sale in ordinary course), cost includes purchase price plus directly attributable costs (e.g., blockchain transaction fees).

It is critical for fintechs to capture these acquisition costs correctly, including wallet/transaction fees or other costs to bring the token into their condition and location of use.

3. Subsequent measurement – choosing the model

After initial recognition, the question becomes: how should you measure the asset at subsequent reporting dates? The two primary models under IFRS for intangible assets under IAS 38 are:

Cost model: The asset is carried at cost less accumulated amortisation (if finite life) and impairment losses. If the asset has an indefinite life it is not amortised but must be annual impairment-tested.
Revaluation model: The asset is carried at fair value, with increases recognised in other comprehensive income and decreases recognised in profit or loss (or as required by the Standard), but this is only permitted if there is an active market.

If the asset is inventory under IAS 2, then the subsequent measurement is generally the lower of cost and net realisable value (NRV). For broker-traders of crypto, IAS 2 allows measurement at fair value less costs to sell.

Hence, for a fintech holding virtual assets not for sale but for future use or holding, IAS 38 cost or revaluation models typically apply. If trading tokens, then IAS 2 may govern.

4. Fair value considerations and market activity

Using the revaluation model or fair value measurement requires careful judgement:

Determine whether there is an active market for the asset (frequent, observable transactions, enough volume). Without an active market, fair value may be unreliable.
Consider the characteristics of the token (fungibility, rights to cash flows, regulatory restrictions). For example, some tokens may have transfer restrictions or are thinly traded, which will limit the ability to reliably measure fair value.
Ensure appropriate disclosures under IFRS 13 “Fair Value Measurement” when the fair value model is used.
Impairment vs upward revaluation: Under the cost model, increases in asset value above cost are generally not recognised (except under revaluation model). Impairments are required when the recoverable amount is lower.

For fintech firms dealing with virtual assets, this means setting up processes to: track market indicators, identify active markets, review token rights and restrictions, and assess impairment triggers.

5. Challenges and practical considerations for fintechs

A number of practical issues arise when valuing virtual assets in fintech contexts:

Volatility and liquidity risk: Virtual assets often have significant price fluctuations and may trade on limited exchanges or peer-to-peer markets. Estimating fair value may require discounting for lack of liquidity.
Token rights and embedded features: Some tokens provide staking rewards, governance rights, or may be part of yield programmes. These features may imply they are financial instruments (within IFRS 9) rather than simple intangible assets.
Business model changes: For fintechs, how the asset is used may evolve rapidly (from hold to trade, or to use in protocol). Accounting must reflect this change and may require reclassification (e.g., inventory to intangible).
Jurisdiction-specific regulatory expectations: For fintechs operating in DFSA, FSRA or similar regimes, the regulators may expect clear disclosures on how digital assets are valued, how control is judged, and how risks (e.g., custodial, liquidity) are managed.
Systems and controls: Because valuation involves judgement (active market existence, impairment indicators, token rights) fintechs should have documentation, policy decisions, and audit-ready controls in place.

6. Summary and checklist for fintech leadership

For fintech firms holding virtual assets the following checklist helps ensure robust valuation practice:

Map your token holdings by asset type, rights attached, business use-case and market activity.
Decide which IFRS standard applies (IAS 2 inventory, IAS 38 intangible, or IFRS 9 financial instrument) based on business model and token attributes.
Select the appropriate subsequent measurement model (cost, revaluation, lower of cost and NRV) and document the rationale.
Ensure your valuation model accounts for market activity, liquidity, rights embedded in the token, and impairment indicators.
Establish disclosures required by IFRS 13, IAS 1 and other relevant standards.
Review the relevance of these policies periodically as token usage, regulation or market trading evolves.
Ensure your audit, accounting and control environment is aligned and tailored for digital asset risk.

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