Crypto funds today don’t just hold Bitcoin and Ethereum anymore. Their portfolios now include staked assets, validator income, liquidity pool tokens, airdrops, yield farming rewards, and cross-chain derivatives. This shift mirrors the broader DeFi ecosystem, which has surpassed $123.6 billion in total value locked in 2025, according to CoinLaw.
And while these assets generate new revenue streams, they’ve also introduced a new level of accounting complexity that traditional accounting systems were never designed for. Conventional platforms can’t detect on-chain events or track multi-wallet portfolios, and they also struggle with fair-value adjustments for volatile tokens. This makes them unfit to manage web3 portfolios appropriately.
Modern fund accounting systems, such as KoinX Books, now fill this gap by translating raw blockchain activity into audit-ready financial reporting. In this guide, we will explain everything you need to know about how to do this effectively.
What Makes Crypto Fund Accounting Different from Traditional Accounting?
Crypto fund accounting differs fundamentally from traditional fund accounting due to the on-chain nature of digital assets. Instead of holding equities or bonds in a centralized custodian account, crypto funds manage assets spread across multiple blockchains, numerous wallets, staking contracts, AMMs, custodians, and DeFi protocols.
Each movement on-chain can represent something materially different from an accounting perspective, such as income, a valuation change, an FX conversion, a realized or unrealized gain, or even the creation of an entirely new asset class.
Under IFRS, most crypto assets fall under IAS 38 (Intangible Assets) or IAS 21 (Foreign Currency Translation). Under US GAAP, many entities apply fair value accounting to crypto assets, treating them as intangible assets.
A fund may hold liquid ETH and staked ETH. Both are ETH, but they cannot be reported the same way due to accessibility and income generation. Because of these differences in accessibility, valuation, and income timing, traditional accounting software cannot accurately distinguish between identical tokens held in materially different states. This is where specialized crypto fund accounting systems become essential.
How to Account for Staking Rewards
Staking rewards might look simple on the surface since the fund deposits tokens, and rewards accrue automatically. But from an accounting perspective, staking is one of the most complex income streams in crypto. This is why we will break it down into these simple questions:
1. When is staking income recognized?
Under both IFRS and GAAP, staking rewards are recognized when control is obtained. This is usually the moment the reward is credited to the wallet or staking address.
For instance, if a fund running an Ethereum validator receives small reward increments every 12 seconds. Each reward must be recorded as income at its fair value at that exact timestamp.
2. How are staking rewards valued?
Fair value is the market price at the moment the reward is received. This means that if SOL rewards hit the wallet at 11:30 AM, the system must use the 11:30 AM price, not end-of-day (EOD) pricing.
3. How are staking rewards treated under IFRS and GAAP?
Under IFRS, staking rewards are treated as income when received. The tokens earned are recorded as a new intangible asset at cost on the date they are received. Under US GAAP, staking rewards are also recognized as income. The tokens are recorded at cost and later revalued under new fair-value rules where applicable.
If the fund later sells the rewards, the gain/loss must be calculated from the fair value at receipt, not the selling price.
How to Account for Airdrops
Airdrops are a signature feature of Web3, but a nightmare for fund accountants. Unlike staking rewards, airdrops aren’t earned. Instead, they’re usually distributed based on holdings or activity. Under both major frameworks, an airdrop is recognized when the fund gains control of the tokens.
If a DAO distributes governance tokens to users who voted on key proposals, and a VC crypto fund receives 12,000 tokens in its Gnosis Safe. The fair value at the exact block timestamp becomes instant income.
Airdrops create tax complexity because many countries treat them as ordinary income at receipt. Prices often fluctuate rapidly, and many airdrops lack liquidity. This lack of liquidity introduces a second challenge: valuation reliability, especially when pricing data is thin or unavailable.
If there’s no active market, IFRS 13 requires the fund to use Level 3 valuation methods such as discounted cash flow or comparable token analysis. Funds often rely on Chainlink Oracle data, Kraken/CMC market feeds, or protocol-level APIs for consistency.
How to Account for LP Tokens and Liquidity Pool Positions
LP tokens may be the most misunderstood assets in crypto accounting because they aren’t normal crypto tokens. They represent claims on underlying assets inside a liquidity pool.
For example, a Uniswap V3 LP token may represent: 1.4 ETH, 2,500 USDC, and accrued trading fees. All of these must be measured separately.
Here are three things that you must note when accounting for LP tokens:
1. Measuring the fair value of LP tokens
Under IFRS and GAAP, LP tokens are valued based on the fair value of the underlying assets.
Modern accounting systems decode LP positions automatically, pulling token balances, fee accruals, and current market data. This is why traditional systems fail because they cannot decode AMM positions.
2. Income recognition
Liquidity providers earn fees automatically. These fees are income when accrued, not when withdrawn. This must be recognized even if the fund leaves the LP position untouched for months.
3. Impermanent loss reporting
LP tokens also introduce unique P&L risks. Funds must measure unrealized impermanent loss, unrealized gains from fees, and the net change resulting from rebalancing inside pools.
Under ASC 820 and IFRS 13, LP positions often fall under Level 2 or Level 3, depending on liquidity and data availability. LP positions blend multiple assets, fee accruals, and rebalancing behavior, which is why accurate reporting requires automation.
Also Read: Coin vs Token: What’s the Difference?
How KoinX Books Automates Fund Accounting for Staking, Airdrops, and LP Tokens
KoinX Books solves these challenges by turning raw blockchain activity into enterprise-grade accounting data. Key capabilities include:
1. Automated on-chain data ingestion
KoinX Books integrates with wallets, exchanges, and DeFi protocols across major chains. Every staking reward, LP fee, bridge transfer, and airdrop is detected automatically.
2. Real-time fair value measurement
The platform uses Oracle feeds and market APIs to value staking rewards, airdropped tokens, LP positions, and liquidity pool fees. Fair value is matched to the exact timestamp of the on-chain event.
3. IFRS/GAAP compliant journal entries
The system automatically generates journal entries for income recognition, revaluations, FX adjustments, GAS fee expensing, and impairment testing under GAAP.
4. Multi-wallet, multi-chain portfolio consolidation
Because funds often manage dozens of wallets, KoinX Books brings all activity into a unified ledger.
5. Audit-ready reporting
With full transaction trails, valuation logs, and export-ready workpapers, audits become significantly smoother.
Conclusion
Crypto fund accounting is fundamentally different from traditional accounting. Staking rewards hit wallets every few seconds, airdrops appear out of nowhere, and LP tokens don’t behave like conventional crypto tokens. Without a modern, automated accounting system, these events quickly become unmanageable.
KoinX Books give crypto-native funds the structure they need: accurate income recognition, reliable valuation, transparent reporting, and fully traceable on-chain audit trails.
Frequently Asked Questions
Are Staking Rewards Taxable When Received Or When Sold?
In most jurisdictions, staking rewards are taxable upon receipt, provided the fund has control over the tokens at the time of credit. For accounting purposes, rewards are recognized as income at fair value on the date of receipt. Later disposals create separate capital gains or losses.
How Should Illiquid Airdrops Be Valued For Accounting?
Illiquid or pre-launch airdrops should be recorded at fair value only if a reliable market price exists. If no observable input is available, funds typically record them at nominal value (often zero) until a verifiable market price emerges. Documentation of pricing sources is essential for an audit.
Can LP Tokens Be Treated As Financial Instruments Under IFRS?
In most cases, no LP tokens generally represent a claim on a pool of underlying assets rather than a contractual right to cash flows, so they fall outside the scope of IFRS 9. They are typically treated as intangible assets (under IFRS) or as crypto assets measured at fair value (under GAAP). However, if the LP structure mimics a regulated fund with redeemable units, financial-instrument treatment may apply, but this is rare in DeFi.
How Do Accounting Systems Track Multiple Wallets And Chains?
Modern crypto accounting platforms rely on API connections to exchanges and custodians, blockchain indexing to capture on-chain wallet activity, and automated tagging to identify staking, LP, or DeFi events. They also provide entity-level segregation for funds operating multiple portfolios.
How Often Should Defi Funds Revalue LP And Staking Positions?
Most funds revalue positions daily or weekly, depending on NAV frequency. Under IFRS and GAAP, crypto assets measured at fair value must be revalued at each reporting date, but funds that offer daily NAVs must update their valuations accordingly.