Over the past few years, OTC (Over-the-Counter) and brokerage trades have become core to institutional crypto liquidity. These off-exchange trades—large order blocks, bespoke pairings, or private deals—now account for an estimated $39 billion in daily trading.
However, unlike exchange trades, OTC and brokered deals lack standardized, publicly verifiable pricing, which leads to challenges in accounting for OTC crypto trades. Valuation disputes, FX mismatches, and settlement delays make reconciliation tricky, and poor handling can trigger audit risk.
With KoinX Books, crypto teams can automate reconciliation, validate pricing feeds, and enforce audit trails—making complex OTC trades manageable at scale. In this guide, we will address how crypto firms should account for OTC and brokerage trades.
What Are OTC and Brokerage Trades in Crypto?
OTC trades are direct, peer-to-peer deals executed off an order book, often between institutional counterparties. Brokered trades use intermediaries that facilitate large-volume execution, reduce slippage, and offer liquidity across venues.
In crypto:
- A broker may match your buy order to a seller across exchanges, quote a price, and settle off-chain.
- OTC desks often use escrow, multisig wallets, or custodial intermediaries to secure funds.
- Prime brokers in Web3 now offer margin, lending, and institutional access similar to traditional finance.
Let’s say a DAO wants to buy $10M worth of BTC without pushing the spot market. It arranges with an OTC desk, negotiates a rate (e.g., $107,750 USD/BTC), and settles via custodial accounts, thereby avoiding exchange order books. Because such transactions are off-exchange, firms must internally verify fair value and book each move for accounting and auditing purposes.
Why Accounting for OTC and Brokerage Trades is Complex?
Unlike regular exchange trades, OTC and brokerage deals are characterized by nuanced pricing, settlement, and counterparty considerations, making accurate accounting a significant challenge. The following points describe the challenges in brief:
Absence of standard pricing source: You may be using broker quotations or off-chain valuations, which introduces valuation uncertainty.
Delays in settlement: A Day 1 trade might settle on Day 3, resulting in mismatches in recognition timing.
Risks of custody: Off-chain movements aren’t visible on-chain, and reconciliation may require receipt confirmations or custodial proofs.
Several fiat conversions: When transactions involve USD, EUR, INR, or other currencies, FX rates can differ between the trade and settlement dates.
The interaction between IFRS crypto accounting standards and GAAP treatment of crypto assets results in varying policies at group and entity levels, contributing to complexity.
Learn more about different crypto accounting methods like FIFO, LIFO, and HIFO to optimize your reporting.
IFRS and GAAP Treatment of OTC & Brokerage Trades
Under IFRS
- Crypto may be classified under IAS 38 (intangible assets) or as inventory (IAS 2), depending on the business model (e.g., trading vs. holding).
- An OTC trade must be recorded at fair value at acquisition if the entity uses a revaluation model.
- If the trade is denominated in a foreign currency, IAS 21 governs FX translation and revaluation gains/losses.
Under U.S. GAAP
The FASB’s new guidance (ASC 350-60) requires entities to measure in-scope crypto assets at fair value at the end of each reporting period. Changes in fair value are recognized immediately in net income (profit or loss). This eliminates the previous cost-less-impairment model for these assets. Brokerage fees and transaction costs incurred to acquire the crypto asset in the ordinary course of business must be expensed as incurred and are not capitalized to the asset’s cost basis.
Comparison Table: IFRS vs GAAP for OTC & Brokerage Trades
|
Treatment Aspect |
IFRS Approach |
GAAP Approach (ASC 350-60) |
|
Recognition |
Fair value or cost (depending on policy) |
Fair Value (changes through Net Income) |
|
Revaluation |
Allowed under the revaluation model |
Required (daily) |
|
Impairment |
Required under Cost Model (Upward reversal possible) |
Not applicable (always carried at fair value) |
|
Brokerage / Spread Costs |
Often part of the value |
Expensed as incurred |
This divergence means subsidiaries under IFRS may report higher asset values than the parent under GAAP, so consolidation adjustments are often needed.
To master tracking the cost of your tokens, check out our guide: Crypto Cost Basis Explained: A Beginner’s Guide to Tracking Your Profits.
How to Record OTC and Brokerage Transactions in Books?
Here’s a step-by-step guide for accounting teams:
Capture Trade Details: Start by capturing all the details of the trade — such as counterparty name, size of trade, price agreed (in fiat or cryptocurrency), and trade date. Proper initial capture creates a clean valuation and easy reconciliation subsequently.
Account for Acquisition: For IFRS (IAS 38/IAS 2) or U.S. GAAP (ASC 350-60): Value the asset on the trade date at its fair value.
Under U.S. GAAP (ASC 350-60): Brokerage commissions, spreads, and acquisition costs related to transactions need to be separately accounted for as an expense within the income statement.
Under IFRS (IAS 38/IAS 2): Bring the asset to its fair value on the date of trade. Costs of a transaction will normally be capitalized to an asset’s initial cost, except in the fair value less costs of sale model (IAS 2), where they may be treated differently.
Adjust for FX Differences: If settlement is delayed or in a different fiat currency, make provision for realized or unrealized FX gains or losses based on IAS 21 (IFRS) or ASC 830 (GAAP). This keeps books in real economic value at consolidation.
Give a Complete Audit Trail: Maintain all supportive paperwork — including broker confirmations, escrow or bank statements, blockchain proofs (where available), and dated pricing sources. A comprehensive audit trail verifies compliance and facilitates external audit inspections.
In KoinX Books, you can import OTC trade data either via API or CSV. Trades are automatically matched with the pricing feeds by software, FX is translated, and IFRS/GAAP-compliant journal entries are generated—reducing manual error and audit risk.
Brokerage Fees, Spreads, and Reconciliation Challenges
OTC and broker trades often carry hidden spreads —the differences between the broker-quoted and the actual executed pricing. Failing to capture this leads to skewed margins and mismatched accounting entries.
Transaction costs vs valuation differences: Some fees reflect execution cost (should be capitalized), while others reflect pricing differences and might go through P&L.
Reconciliation across brokers: If one subsidiary uses broker A and another broker B, manually aligning inter-firm entries is tedious.
Trad- matching errors: Trades may settle across wallets and counterparties asynchronously, causing mismatches.
KoinX Books auto-ingests broker feeds (CEX, OTC, institutional brokers) and fetches mid-market references for validation. Spread and fee differences are flagged for review, and reconciliations happen automatically across wallets and ledgers.
FX Conversion and Valuation Issues in OTC Deals
Consider a firm in India purchasing BTC via a Singapore OTC desk in USD. The trade date USD/INR rate might differ from the settlement date rate, producing FX gains or losses.
- Under IAS 21, the trade is translated at the spot rate on the trade date; settlement differences are recorded as FX gain or loss.
- If the subsidiary’s base currency is INR but the parent reports in USD, further translation is required at consolidation.
Example:
Trade executed: 10 BTC at $100,000 = 1,000,000 USD.
Trade date USD/INR = 87.0 → initial value = ₹87,000,000.
Settlement in 2 days: USD/INR = 85.0 → ₹85,000,000.
The ₹2,000,000 difference is recognized as an FX loss in the books.
Because OTC trades often lag settlement, firms must track unrealized FX impacts and properly reflect them under accounting standards.
Audit and Compliance Considerations for OTC Trades
When auditors review OTC and brokerage trades, they scrutinize:
Fair value validation: For both IFRS (revaluation model/IAS 2) and the new U.S. GAAP (ASC 350-60), auditors will scrutinize the source and independence of the pricing feed used for daily/period-end valuation. Do you have independent price sources or broker justification?
Counterparty proof: Copies of agreements, checks, and custody documents.
AML / KYC records: Ensure due diligence trails for counterparty legitimacy.
Settlement proof: Bank statements, wallet transfers, multisig confirmations.
Regulators (e.g., MAS in Singapore, FCA in the UK) often require transparent logs of OTC trades. With KoinX Books, firms can generate audit-ready OTC reconciliation reports, complete with chain proofs, broker confirmations, and pricing snapshots—faster and with fewer errors.
How KoinX Books Simplifies OTC & Brokerage Accounting?
KoinX Books is engineered explicitly for crypto OTC accounting at scale. Its features include:
- Automated import of OTC and broker trade files (CSV, API)
- Real-time market pricing and FX rate application
- Automatic generation of IFRS or GAAP-compliant journal entries
- Cross-checking off-chain trade data with on-chain holdings
- Audit-ready reconciliation and exception dashboards
CFOs, hedge funds, DeFi DAOs, and institutional crypto firms trust KoinX Books to handle complex OTC portfolios with minimal manual overhead.
Try KoinX Books to manage your OTC trades and eliminate valuation headaches.
Conclusion
Since OTC and brokered trades involve prices, timing, and FX risks, there is always a risk of manual accounting errors. Accurate crypto OTC accounting is necessary for compliance, audits, and investor trust. With KoinX Books, finance teams can scale OTC operations with trusted automation, solid reconciliation, and transparency across every trade.
Frequently Asked Questions
How Do You Value An OTC Crypto Trade Without An Exchange Rate?
If a publicly available exchange rate is not available, use a broker quote or a mid-market rate from an audited data aggregator on the trade date. Record the source, basis of valuation, and date and time for auditability and regulatory requirements.
Are Brokerage Commissions Deductible For Tax Purposes?
In most jurisdictions, brokerage commissions qualify as transaction costs. They can either reduce the capital gain on disposal or be expensed immediately, depending on the applicable tax and accounting framework.
Can Unrealized FX Gains Or Losses Apply To OTC Trades?
If settlement occurs after the trade date or involves a different fiat currency, you’ll need to recognize FX translation gains or losses. Apply IAS 21 (IFRS) or ASC 830 (GAAP) rules for accurate foreign currency remeasurement.
Do OTC Trades Need On-Chain Confirmation For Audit?
Not necessarily. Many OTC trades are off-chain by design. However, a complete audit trail requires broker contracts, escrow confirmations, settlement records, and wallet or bank transfer documentation to verify ownership and timing.
Can Tools Like KoinX Track OTC Crypto Transactions Automatically?
Yes, the KoinX Books platform can import, reconcile, and automate journal entries for OTC trades under both IFRS and GAAP. It integrates broker statements and pricing data to simplify valuation, consolidation, and compliance reporting.
