What is a crypto-currency?
“Crypto” means secret or concealed, hence, a crypto-currency is actually a secret currency! The modern version of a crypto-currency is in its digital form and usage. In technical terms, a cryptocurrency is a decentralised digital currency with no physical form.
The accounting treatment of the crypto-assets depends greatly on the purpose for holding the crypto-assets. The purpose can differ for different parties. For example, the issuer of the crypto-currency who has created the crypto-currency through its efforts, may view their crypto-currency created as inventory. Subsequent to the issue, the holders of crypto-assets who make use of these assets as a currency for purchase of goods or services, or for trading may treat it as cash.
Is crypto-currency cash?
Cryptocurrencies are mainly used as a medium of exchange for goods and services, to some extent like a currency. Unlike transitional currencies, cryptocurrencies are not issued and backed by any government and involve no central repository or central bank; hence, they are not recognised as legal tender (fiat money).
As a result, cryptocurrencies are not considered as cash.