Crypto vs Token vs Coin: The CFO's Guide to Classification, Accounting, and Valuation
Author: Redwood Valuation Content Team
Published: June 29, 2026
Crypto assets are often described using three interrelated terms. A coin is the native asset of its own blockchain, such as Bitcoin or Ether. A token is built on an existing blockchain, typically through smart contracts. “Cryptocurrency” is the umbrella term that applies to both coins and tokens. While these are terms that any CFO working with digital assets needs to know, they are primarily technological labels. They rarely determine the correct accounting, tax, or valuation treatment for an asset. For that, the analysis must move beyond labels and focus on the rights the asset carries, the applicable U.S. GAAP and tax rules, and the available market evidence.
Consider a single treasury holding a Bitcoin position, a fiat-backed stablecoin, a governance token, and a restricted token acquired through a Simple Agreement for Future Tokens (SAFT). Each may sit in the same digital-asset portfolio, but each can raise different issues: what rights the holder has, whether ASC 350-60 applies, which market inputs support fair value, and what documentation is needed for audit review.
Scope note: This article focuses on U.S. companies and funds holding digital assets for financial-reporting purposes. Issuer accounting, tax planning, and securities-offering compliance require separate analysis.
CFO quick answer: For each digital asset on the balance sheet, the CFO’s workflow is: (1) identify the asset and the rights it conveys, (2) determine whether it falls within ASC 350-60 scope, (3) if fair value measurement is required, identify the principal or most advantageous market, (4) assign the ASC 820 hierarchy level when ASC 820 applies, and (5) document the conclusion, inputs, and reassessment triggers.
The CFO Decision Framework
The same five steps apply to any digital asset, from a deep-liquidity coin to a pre-launch token. Each later section of this guide maps to one of these steps.
Identify the asset and its rights. Coin or token, and what type: utility, governance, security, stablecoin, or non-fungible token (NFT). The rights the instrument conveys matter more than its label.
Determine ASC 350-60 scope. Apply the six scope criteria. In scope means fair value through net income; out of scope means another standard governs.
Identify the principal market. Locate the market with the greatest volume and activity for the asset that the entity can access.
Assign an ASC 820 hierarchy level. Level 1, 2, or 3, based on the inputs available in that market.
Document and reassess. Record the scope conclusion, market selection, inputs, and any restriction analysis; revisit each reporting period and on material events.
Definitions: Coins, Tokens, and Cryptocurrency
A coin is the native asset and medium of exchange of its own blockchain (Bitcoin on the Bitcoin network, Ether on the Ethereum network). Coins are created through mining (proof-of-work) or staking (proof-of-stake), and building one requires developing a new blockchain. "Cryptocurrency" is the umbrella term for both coins and tokens, though professional usage increasingly separates them.
A token is deployed on top of an existing blockchain. For example, an ERC-20 token can be created by deploying a smart contract on Ethereum that implements the ERC-20 token standard. Since tokens don't require their own blockchains, they are generally faster and cheaper to create, but they also depend upon their host chains for their security and functionality.
| Characteristic | Coin | Token |
|---|---|---|
| Blockchain | Native to own blockchain | Built on existing blockchain |
| Creation method | Mining (PoW) or staking (PoS) | Smart contract deployment |
| Development effort | High (requires new blockchain) | Lower (uses existing infrastructure) |
| Examples | Bitcoin, Ether, Litecoin | USDC, Chainlink, Uniswap tokens |
| Primary function | Medium of exchange on native chain | Various (utility, governance, representation) |
Tokens come in several common varieties:
Utility tokens grant access to a product or service within a blockchain ecosystem.
Security tokens represent a claim on underlying assets or cash flows.
Governance tokens provide voting rights in a protocol.
Stablecoins target a pegged value to fiat currency or another asset.
NFTs represent unique, non-interchangeable digital assets.
Identifying coin versus token, and the specific token type, is step one of the framework. The label points toward the rights the instrument carries, and those rights drive everything downstream.
Three Regulatory Lenses, Not Three Final Answers
A single digital asset can be viewed through multiple regulatory lenses at once, each answering a different question; none overriding the others. Take Ether. For market and derivatives context, it has been treated as a commodity under the Commodity Exchange Act. For federal tax, it is property. For financial reporting, it is measured under ASC 350-60 and ASC 820. One asset can require three frameworks and three separate analyses, each considering the asset on its own terms.
Securities Law: An Offer or Transaction Question
Securities analysis attaches to an offer, sale, or transaction, not to the asset label. The current Commission-level interpretation is SEC Release Nos. 33-11412 and 34-105020, "Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets,"issued March 17, 2026, and effective March 23, 2026. The SEC issued the interpretation, and the Commodity Futures Trading Commission (CFTC) provided guidance relating to that interpretation.
The Howey test still controls. Certain token offerings or transactions may be treated as securities transactions if purchasers invest money in a common enterprise with an expectation of profit based primarily on the efforts of others. The four-prong test asks whether there is:
An investment of money,
In a common enterprise,
with an expectation of profit,
derived primarily from the efforts of others.
Two points are worth keeping in view. SEC Chair Atkins stated in November 2025 that "most crypto tokens trading today are not themselves securities." That statement is useful as evidence of regulatory posture, not as an operative rule or a shortcut around a Howey analysis. And in SEC v. Ripple Labs, the analysis was applied transaction-by-transaction rather than as a blanket classification: a token is not a security per se. (The treatment of secondary-market and programmatic sales remains contested on appeal, so it should not be cited as settled.)
CFTC: Commodity Status Is Not the Same as Scope of Oversight
Bitcoin and Ether have been treated as commodities under the Commodity Exchange Act in CFTC derivatives and enforcement contexts. But that does not mean the CFTC has comprehensive authority over every market where they trade. The CFTC’s core authority covers derivatives, along with anti-fraud and anti-manipulation enforcement in certain spot-market contexts. Its broader spot-market oversight remains limited and fact-dependent. Commodity treatment also does not eliminate the need to consider SEC and IRS classifications separately.
IRS: Property for Tax, a Standard Distinct from Fair Value
For federal tax purposes, digital assets are property, not currency, under IRS Notice 2014-21. Tax fair market value and ASC 820 fair value are related but distinct concepts. Tax fair market value generally refers to the price between a willing buyer and willing seller, while ASC 820 fair value refers to an exit price in an orderly transaction between market participants. Because the standards serve different purposes, the phrase “ASC 820 fair market value” should be avoided
Tax reporting note: Brokers generally report digital-asset transactions on Form 1099-DA. Gross-proceeds reporting begins for 2025 transactions and basis reporting begins for 2026 transactions, subject to applicable exceptions and transitional relief. The IRS granted good-faith penalty relief for 2025. This is a tax-compliance matter and is distinct from the ASC 820 measurement used for financial reporting.
| Regulatory Lens | What It Answers | Applies To | Key Implication |
|---|---|---|---|
| Securities law (SEC, CFTC concurring) | Is a given offer or transaction a securities transaction? | Offers/sales/transactions under Howey | Registration and disclosure obligations attach to the transaction, not the label |
| CFTC (Commodity Exchange Act) | Is the asset a commodity for market/derivatives context? | Bitcoin, Ether, similar assets | Derivatives and anti-fraud authority; limited spot oversight |
| IRS (Notice 2014-21) | How is it taxed? | All digital assets | Property treatment; capital gains; Form 1099-DA reporting |
GAAP Accounting Under ASU 2023-08
ASU 2023-08added ASC 350-60 and requires in-scope crypto assets to be measured at fair value, with changes recognized in net income each period. It is effective for fiscal years beginning after December 15, 2024. The standard replaced the prior model, under which many crypto assets were treated as indefinite-lived intangible assets subject to impairment, meaning they could be written down but not written back up when values recovered. The key limitation is scope: ASC 350-60 does not apply to every digital asset.
ASC 350-60 Scope: Six Criteria
A crypto asset is within ASC 350-60 only if it meets all six of the following criteria. These same six apply throughout this guide.
It meets the definition of an intangible asset.
It does not provide enforceable rights to, or claims on, underlying goods, services, or other assets.
It is created or resides on a distributed ledger or blockchain.
It is secured through cryptography.
It is fungible.
It is not created or issued by the reporting entity or its related parties.
Criteria three and four are straightforward for many digital assets, but should still be documented in the scope analysis. Criterion six is about the reporting entity or its related parties: tokens created or issued by the reporting entity or its related parties are outside the scope. These criteria define the boundary of ASC 350-60; they do not purport to cover every digital asset.
| Scope Criterion | Requirement | Effect |
|---|---|---|
| Intangible asset | Meets the definition of an intangible asset | Threshold for any further analysis |
| No enforceable claim | No enforceable rights to underlying goods, services, or assets | Instruments with redemption/claims fall out |
| On a distributed ledger | Created on or residing on a blockchain | Straightforward for most; document it |
| Cryptographically secured | Secured through cryptography | Straightforward for most; document it |
| Fungible | Interchangeable units of the same type | Non-fungible assets fall out |
| Not issued by the entity | Not created or issued by the reporting entity or its related parties | Self-issued and related-party tokens fall out |
Effective date: ASU 2023-08 is effective for fiscal years beginning after December 15, 2024. Entities holding in-scope crypto assets should already be measuring them at fair value through net income.
Assets That Fall Outside the Scope
Several digital-asset types commonly fall outside ASC 350-60:
NFTs fail the fungibility criterion (criterion five). The codification does not name "NFTs"; it is the fungibility test that excludes them.
Stablecoins with enforceable redemption rights may carry a claim that fails criterion two, pointing toward financial-instrument or receivable treatment rather than ASC 350-60.
Tokens representing a claim on underlying goods, services, or assets fail criterion two.
Wrapped or tokenized real-world assets require a case-by-case scope determination based on the rights conveyed.
Disclosure
For significant holdings, ASU 2023-08 requires disclosure of the name and description of the crypto asset, its cost basis, its fair value, and the number of units held. With scope settled, the remaining question is measurement, which turns on where the asset falls in the ASC 820 hierarchy.
ASC 820 Fair Value Measurement
ASC 820 defines fair value as the exit price in the principal market, the price to sell an asset in an orderly transaction between market participants. The measurement runs through a three-level hierarchy based on the inputs available.
Level 1: Quoted Price in an Active, Accessible Market
Level 1 is a quoted price in an active market for an identical asset that the entity can access at the measurement date. For deep-liquidity assets such as Bitcoin and Ether, the quoted price from the principal market is typically appropriate. When an active, accessible market exists, quoted market evidence is usually the starting point under ASC 820.
Identifying the principal market is the work. Aggregator and index prices (services such as CoinMarketCap or CoinGecko) are not a substitute for identifying the principal market, which is the market with the greatest volume and activity for the asset that the entity can access. As PwC's crypto accounting guidediscusses, that means identifying a specific market and applying its prices consistently.
A point that auditors test: ASC 820-10-35-44 prohibits a blockage or size discount at any level, including Level 1, regardless of position size. A large holding cannot be discounted off the Level 1 quoted price, and it cannot be moved to Level 2 or Level 3 on the theory that the full position could not be sold at the quoted price. Position size is not a permissible fair-value adjustment.
Level 2: Observable, Indirect Inputs
Some tokens trade across multiple markets but lack the volume for Level 1. Level 2 uses observable but indirect inputs: prices from less-active markets or adjusted prices for comparable assets. The inputs stay grounded in observable data, even when indirect.
Level 3: Unobservable Inputs
Many holdings are illiquid and difficult to value, which puts them at Level 3, where measurement is built on the entity's own assumptions. Common Level 3 holdings include:
early-stage tokens before a major market listing,
restricted or vesting tokens, including those from SAFTs,
tokens with limited trading history, and
pre-launch project tokens.
Level 3 techniques include:
Comparable analysis: identify similar projects with observable valuations and adjust for differences.
Income-style analysis where a claim exists: applicable only where token holders or validators have identifiable economic inflows (fee streams, staking or validator economics, a revenue share). It is misleading to treat network revenue as token-holder cash flow without a clear linking mechanism.
Reference pricing: aggregate prices from multiple smaller sources to establish a reference point.
Discount for Lack of Marketability (DLOM): Apply a marketability discount, comparable to the analysis used for restricted stock, where the asset itself carries a marketability constraint. A DLOM may be appropriate only when marketability constraints are part of the asset or otherwise reflected in market-participant assumptions under the applicable unit of account. It cannot be used as a disguised blockage or position-size discount.
A restriction analysis governs whether a discount belongs in the measurement at all. Under ASC 820, the analysis turns on whether the restriction is a characteristic of the asset being measured or a characteristic of the holder. ASU 2022-03 reinforces this point for equity securities by clarifying that contractual sale restrictions are not part of the unit of account and are not considered in fair value. For crypto assets, the analysis should be documented carefully: holder-specific restrictions and position size should not reduce fair value, while restrictions embedded in the asset's terms or transferability may affect the selected inputs or valuation technique where market participants would consider them. Lockups, legal restrictions on the asset, thin trading, and illiquidity may drive a Level 2 or Level 3 measurement; a blockage or position-size discount may not.
Network-effect models such as Metcalfe's law are supplemental supporting evidence, not a standalone or primary method for every token. Machine-learning valuation models are research context, not a recommended method for financial reporting; whatever technique is selected, the documented rationale is what auditors examine.
| Level | Inputs | Crypto Application | Examples |
|---|---|---|---|
| Level 1 | Quoted price, active accessible market | Deep-liquidity assets | Bitcoin, Ether |
| Level 2 | Observable, indirect | Tokens with multi-market but thin trading | Mid-cap altcoins |
| Level 3 | Unobservable, own assumptions | Illiquid, restricted, pre-launch tokens | Early-stage tokens, SAFT tokens |
When a Level Changes
A hierarchy classification is not permanent. A token can move from Level 3 toward Level 1 as a market develops. If an illiquid token gains an active market listing, the entity reclassifies and discloses the change under ASC 820.
Special Cases: Stablecoins, Security Tokens, and NFTs
A few asset types sit at the edge of the scope criteria and call for conditional analysis rather than a default answer.
Stablecoins
A fiat-backed stablecoin with enforceable redemption rights may be accounted for as a receivable or financial instrument rather than as an ASC 350-60 crypto asset, because the enforceable claim fails criterion two. Not every stablecoin offers an enforceable redemption right, so the legal structure of the specific instrument governs the conclusion. The July 2025 GENIUS Act provides a regulatory framework for compliant stablecoins, but the accounting still turns on the instrument's characteristics.
Security Tokens
A security token that represents a claim on underlying assets or cash flows may support an income approach. But an asset-based, market, or hybrid approach may fit better depending on the rights conveyed. A security token is not automatically a discounted cash flow (DCF) exercise. These instruments also raise securities-transaction questions that a utility token may not.
NFTs
NFTs are excluded from ASC 350-60 because they fail the fungibility criterion. For many holders, they may fall under existing intangible-asset guidance, but the treatment depends on the holding entity and its purpose; it should not be stated categorically as an indefinite-lived intangible subject to impairment. Value drivers (rarity, creator, utility, ownership history) do not map cleanly to standard valuation frameworks.
| Asset Type | ASC 350-60 Scope | Likely Treatment | Valuation Approach |
|---|---|---|---|
| Stablecoin (fiat-backed, enforceable redemption) | Out (fails criterion 2) | Receivable / financial instrument | Redemption amount / financial-instrument measurement |
| Utility token | In, if it meets all six criteria | Crypto asset (ASC 350-60) | Level 1–3 by market activity |
| Security token (claim on cash flows) | Depends on rights | Financial instrument or other | Income, asset, market, or hybrid by rights |
| NFT | Out (fails fungibility) | Depends on holder and purpose | Rarity, creator, utility factors |
What to Document
The fair value conclusion is only as defensible as its workpapers. For each material digital-asset position, the documentation should capture:
The asset description and the rights it conveys
The holder/issuer relationship, including any related-party status (criterion six)
The ASC 350-60 scope conclusion tested against the six criteria
The principal-market identification, with the measurement date and time
The ASC 820 hierarchy level and the source of each input
The restriction analysis (asset-characteristic versus holder-characteristic) under ASC 820, with ASU 2022-03 cited as supporting analogy where relevant
The tokenomics assumptions
The method selection and weighting, with sensitivity analysis
The rationale for any marketability adjustment, and why it is not a prohibited blockage or position-size discount
The reassessment triggers
When this becomes a valuation project. Some situations move beyond an internal scope memo and call for a formal valuation: material crypto holdings; illiquid or restricted tokens; SAFTs; no active principal market; uncertainty about a stablecoin's redemption rights; wrapped or tokenized real-world assets; audit pushback on a prior conclusion; or a significant price movement near quarter-end.
How Redwood Helps
In our practice, Redwood Valuation supports finance teams across the harder edges of digital-asset reporting: ASC 350-60 scope memos tested against the six criteria; principal-market selection and documentation; Level 3 measurement for restricted and pre-launch tokens; DLOM analysis; audit-ready documentation; and periodic remeasurement. For organizations with material or complex holdings, that support is generally far less costly than a restated financial statement or a failed audit. Our portfolio valuation, complex security valuation, and 409A practices bring the same standards-based rigor to digital assets where token holdings intersect with compensation, treasury, or investor reporting.
Conclusion
Classification is the starting point, not the answer. Knowing whether a holding is a coin or a token, and which token type, points toward the rights it carries. The rights, the ASC 350-60 scope conclusion, the level of market activity, and the documentation are what determine the accounting and the valuation.
The practical sequence holds across the balance sheet:
Rights drive scope. The six ASC 350-60 criteria turn on whether the asset carries an enforceable claim, is fungible, and is not issued by the reporting entity or its related parties.
Market activity drives the hierarchy. Level 1 for deep-liquidity assets with an accessible market; Level 2 or Level 3 as observable inputs thin out, with blockage and position-size discounts off the table at every level.
Regulation is three lenses, not one verdict. Securities, commodity, and tax analyses run in parallel and are decided separately.
Documentation is what survives the audit. The scope memo, principal-market selection, input sources, and restriction analysis are the record that an auditor reviews.
The regulatory framework will keep evolving. The need for a documented, standards-based valuation will not. For material or complex holdings, working with credentialed valuation specialists, such as Accredited Senior Appraiser (ASA), Chartered Financial Analyst (CFA), or Accredited in Business Valuation (ABV), supports positions that withstand audit scrutiny.
Frequently Asked Questions
When is ASU 2023-08 effective?
ASU 2023-08 is effective for fiscal years beginning after December 15, 2024. Entities holding in-scope crypto assets should already be measuring them at fair value, with changes in net income, under ASC 350-60.
How do I value Bitcoin or Ether for financial reporting?
Use the quoted price for the identical asset from the principal market that the entity can access at the measurement date. That is a Level 1 measurement under ASC 820. Identify a specific principal market and apply it consistently; aggregator or index prices do not substitute for principal-market identification. Position size is not a permitted discount, even for a large holding.
Is my stablecoin a crypto asset under GAAP?
It depends on the rights. A fiat-backed stablecoin with an enforceable redemption right may carry a claim that fails ASC 350-60's no-enforceable-claim criterion, pointing toward receivable or financial-instrument treatment rather than ASC 350-60. Not every stablecoin offers enforceable redemption, so the specific legal structure governs.
What about a token that trades only on a small market?
Assess whether the market is active enough (sufficient volume and frequency for ongoing pricing) to support a Level 1 measurement. If not, a Level 2 or Level 3 measurement with documented inputs and judgment is generally required. There is no bright-line threshold; the conclusion rests on documented professional judgment.
Are NFTs in scope under ASU 2023-08?
No. NFTs are excluded from ASC 350-60 because they fail the fungibility criterion. For many holders they may fall under existing intangible-asset guidance, but the treatment depends on the holding entity and its purpose rather than a single categorical answer.