INSIGHT

Establishing internal controls for crypto transactions

Javier Salinas • April 1, 2025

Industries: Blockchain & Digital Assets

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Cryptocurrency companies operate in uncharted territory, facing unique governance challenges that traditional financial controls weren’t designed to address. Establishing internal controls for crypto transactions has become essential for businesses seeking to manage digital assets safely and efficiently. 

As regulatory scrutiny increases and crypto operations become more complex, proper controls help prevent potential financial losses, reputational damage and compliance issues. This article explores key strategies for implementing effective internal controls for crypto transactions and how these measures can strengthen your organization’s financial governance. 

Understanding the need for crypto controls 

The decentralized nature of blockchain technology creates distinct risks that traditional financial controls weren’t designed to address. Without proper internal controls for crypto transactions, organizations expose themselves to significant vulnerabilities, such as: 

• Prolonged and costly audits that can damage credibility 
• Increased fraud risk through inadequate segregation of duties
• Financial reporting inaccuracies leading to poor decision-making
• Regulatory compliance challenges with AML and KYC requirements
• Inadequate asset safeguarding against security breaches 
• Inefficient processes causing operational bottlenecks 

“Crypto-specific internal controls are critical for organizations dealing with digital assets.  For example, robust internal controls, such as with respect to anti-money laundering (AML), know-your-customer (KYC), and tax-reporting requirements. ensure timely and accurate reporting, reducing regulatory scrutiny and potential penalties. Likewise, these internal controls contribute to helping ensure not only accurate financial reporting but also a more streamlined audit process considering the complex accounting and valuation issues raised with cryptocurrencies (e.g., impairment testing, fair market value determination, revenue recognition).” – Javier Salinas – Partner, International Tax and Blockchain and Digital Assets Leader 

Key components of effective crypto controls 

When establishing internal controls for crypto transactions, consider implementing these critical elements: 

Segregation of duties 

Distribute responsibilities for initiating, approving and recording crypto transactions among different team members. This fundamental control prevents any single person from having excessive authority over transactions. Create clear roles for wallet access, transaction approval and reconciliation processes. 

Access control protocols 

Implement strict access controls for wallets, private keys and transaction systems. Use multi-signature requirements for high-value transactions and establish formal authorization thresholds. Document who has access to what systems and review these permissions regularly. 

Transaction validation and verification 

Create procedures for validating transactions before execution. This includes checking recipient addresses, confirming transaction amounts and documenting the business purpose. Establish regular reconciliation processes to verify that recorded transactions match blockchain activity. 

Documentation and evidence collection 

Maintain comprehensive documentation of all crypto transactions and control activities. For each control, document its purpose, who performs it, how often it’s tested and evidence of its effectiveness. This documentation proves invaluable during audits and regulatory examinations. 

Leveraging technology for stronger controls 

Modern control systems can enhance your ability to manage crypto risks. Consider implementing: 

• Automated monitoring tools: Use solutions that automatically track blockchain activity across chains, exchanges and custodians. These tools can flag unusual transactions, reconciliation discrepancies and potential compliance issues in real-time. 
• Control dashboards: Centralize your control framework with dashboards that serve as action lists, highlighting controls that require testing or attention. These systems can assign preparers and reviewers, ensuring proper segregation of duties while tracking completion status. 
• Testing and evidence management: Implement systems that allow you to perform control tests and document results within a single platform. These solutions create comprehensive audit trails that demonstrate your control environment’s effectiveness to auditors and regulators. 

3 common challenges in crypto control implementation 

Organizations often encounter obstacles when establishing internal controls for crypto transactions, such as: 

1. Keeping pace with technological change 

Blockchain ecosystems evolve rapidly, requiring controls that can adapt to new protocols, token standards and transaction types. Build flexibility into your control framework and schedule regular reviews to assess emerging risks. 

2. Balance between security and efficiency 

Controls must be robust enough to protect assets but streamlined enough to enable business activities. Overly cumbersome controls lead to workarounds that create vulnerabilities. Find the right balance for your organization’s risk appetite and transaction volume. 

3. Training and awareness 

Many financial professionals lack deep understanding of blockchain technology. Invest in training programs that build crypto literacy across your finance, accounting and audit teams to strengthen your control environment. 

Preparing for audit success 

Well-designed internal controls for crypto transactions significantly improve audit outcomes. Focus on: 

• Control evidence: Document all control activities with time-stamped evidence showing who performed the control and who reviewed it. Maintain this documentation in a centralized system accessible to auditors. 
• Month-end processes: Establish clear month-end procedures that include balance reconciliations, transaction tie-outs and verification of price feeds and cost basis calculations. Document these activities thoroughly to streamline the audit process. 
• Risk-control mapping: Demonstrate how each control addresses specific crypto risks. This mapping shows auditors that you’ve thoughtfully designed your control environment to mitigate the unique challenges of cryptocurrency operations. 

Establishing internal controls with support from BPM 

Establishing internal controls for crypto transactions requires thoughtful planning and implementation, but the benefits far outweigh the investment. With proper controls, your organization can confidently navigate the complexity of blockchain technology while maintaining strong governance.  

For organizations seeking to enhance their crypto control frameworks, working with BPM provides access to advisors who understand both blockchain technology and financial controls. We can help design, implement and test the internal controls for crypto transactions that your organization needs to thrive in this evolving financial landscape. For more information, contact us.