At the recent Digital Asset Summit, a panel titled “Developing Accounting Frameworks for Digital Assets – Key Insights for Financial Reporting” brought together leaders from some of the most influential organizations in the digital asset space. Moderated by Reagan Cook, Solutions Expert, Taxbit, joined by thought leaders:
- David Byrd, PhD, Partner, Global & Americas Blockchain Assurance Leader, EY
- Andrea Perlak, Chief Executive Officer & Founding Partner, CAG
- Afeez Awowole, Director/Head of Technical Accounting & Digital Assets, Ava Labs
The discussion provided an unfiltered look at the current challenges and emerging solutions in digital asset accounting.
A Different Game: Why Web3 Accounting Isn’t Traditional Accounting
Web3 is rewriting the rules of finance—and accounting is struggling to keep up. Perlak underscored the disconnect: “The rules that are there don’t necessarily make sense… So, what’s reasonable?” Perlak’s firm–Crypto Accounting Group, which works with crypto-native startups, often deals with founders who have only basic fiat accounting systems in place but are aiming for billion-dollar valuations. These companies must navigate compliance and reporting requirements with very little foundational structure.
Byrd added that the dichotomy between crypto-native startups and traditional financial institutions entering the space creates a unique tension. The latter often bring strong internal control systems but lack Web3-specific knowledge. “The two different types of clients… are just so vastly different,” he noted, reflecting the challenge of developing frameworks that can serve both camps effectively.
The Shift to Fair Value and Its Operational Impact
One of the biggest changes in the U.S. accounting landscape has been the move to fair value accounting for digital assets. This shift is fundamentally altering how companies think about financial reporting.
“For entities that trade or interact with digital assets, it’s a complete overhaul,” said Awowole. He highlighted the need to rethink inventory management, asset tagging, real-time pricing, and wallet classification in light of the new standards. The guidance, while helpful, still excludes many asset types and introduces operational complexity due to its limited scope and divergence from IFRS.
This misalignment creates what Awowole called a “zigzag” path to compliance, increasing the burden on finance teams and emphasizing the need for clearer, more inclusive global standards.
Data as the Battlefield
A consistent theme across the panel was the critical role of data in Web3 accounting. “Data is the battlefield,” Awowole stated, referring to the challenges of reconciling massive volumes of blockchain transaction data. Whether manually or through automation, data must be scrubbed, tagged, and organized to support accurate reporting. The complexity is not due to poor tools or talent but to the multidimensional nature of blockchain transactions.
Byrd echoed this sentiment: “You want your books and the blockchain to tie together.” He stressed the importance of securing accurate, complete, and reliable data from smart contracts and node infrastructure. This often involves leveraging third-party vendors, which in turn raises the need for proper controls like SOC 1 Type 2 reports to ensure data integrity.
The Growing Need for Global Standards
The fragmented nature of accounting standards globally is a persistent obstacle. “This is the most borderless industry I’ve ever seen,” said Perlak. For Web3 companies operating across multiple jurisdictions, managing compliance with hundreds of tax and reporting regimes is not scalable. Uniform global accounting standards would alleviate this issue and provide clarity for both financial statement preparation and audit readiness.
Byrd offered a realist’s view of how accounting standards evolve. Change, he said, often lags innovation and usually follows once a critical mass of public companies begin engaging in a specific activity. “We didn’t get all the challenging cases that we hope—stablecoins, self-issued tokens, asset-backed NFTs,” he observed. Until that critical mass is reached, companies must make good-faith interpretations within existing frameworks.
Audit Readiness: A Moving Target
Audit readiness was a major topic, and the panelists stressed the importance of being proactive. “Don’t save it for later,” Awowole warned. Given the volatility of crypto markets and the difficulty of retrieving historical data, transactions must be documented in real time to ensure compliance.
Byrd explained that many firms underestimate the scope of what’s needed for an audit. “Not all of these clients that realize they need an audit are ready for one,” he said. Some haven’t documented any policies, others don’t have a finance function at all. Without early planning, companies risk becoming “unauditable”—a condition once theoretical, but now common in Web3.
Perlak added that pricing data, particularly for peer-to-peer transactions, can vanish over time. “If you didn’t record it when you did it, try to recover that data three years later—it’s like, no way.”
Collaboration Between Product, Legal, and Accounting
A recurring insight from Awowole was the importance of cross-functional collaboration inside organizations. At Ava Labs, product, legal, tax, and accounting teams all have a seat at the table when building new products. “Everyone needs to know what is going on and where this leads,” he said. This integrated approach helps companies anticipate regulatory and accounting implications before they become issues.
Perlak reinforced this with a practical reminder: “You can’t go and fundraise if you don’t have some basic financials in place. You have to understand your runway.” Too often, companies delay engaging finance teams until it’s too late.
Regulation Through Collaboration, Not Confusion
One positive development noted by the panel is the recent move away from regulatory ambiguity. “It’s no longer regulation by enforcement—now we’re seeing regulation via collaboration,” said Awowole. He cited recent SEC clarifications on stablecoins and crypto mining as steps toward creating a more coherent policy landscape.
Byrd added that clearer frameworks don’t just benefit the companies being audited—they also make the auditor’s job more feasible. As regulatory structures evolve, auditors can apply consistent standards, reducing friction during the audit process.
Looking Forward: A Call for Principle-Based Standards
The panel concluded with a shared vision: the need for a unified, principle-based accounting standard for digital assets. “We’re stitching policies and legislations and task codes together like a financial patchwork,” Awowole said. Instead, the industry needs standards that are global, forward-looking, and grounded in economic reality.
Despite the challenges, the message from this session was hopeful: real progress is being made, and the industry is maturing. But to support innovation at scale, accounting must evolve in lockstep—not several steps behind.
To learn more, watch the full panel discussion on demand today.
