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Digital assets come in a variety of forms, and new digital assets (sometimes referred to as digital tokens) are emerging almost daily. The purpose of these digital assets varies. These assets may function as a digital medium of exchange, provide a right to use a product or service, provide rights to an underlying asset, or provide voting rights and/or rights to profits/losses. To determine the appropriate accounting, a holder should analyze the characteristics of the digital assets and the rights the holder obtains to determine the accounting standards to apply.
Under the US GAAP accounting framework, digital assets (even those that can function as a medium of exchange) likely do not meet the definition of cash as they are not legal tender. Digital assets also may not meet the definition of a financial asset as they do not include an obligation to deliver cash or another financial instrument. However, given that intangible assets are defined as assets that lack physical substance, many digital assets meet this definition. When a digital asset is determined to meet the definition of an intangible asset, it should follow the guidance in ASC 350.
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