The Financial Accounting Standards Board (FASB) has unanimously voted to review accounting rules for exchange-traded digital assets in the United States. This could have major implications for corporations seeking a regulatory pathway for better managing cryptocurrencies on their balance sheets.
Celebration Among Bitcoiners
Microstrategy CEO Michael Saylor claimed the result of the vote was 7-0 over Twitter on Wednesday. Though the official result is yet to be posted by the board itself, the FASB’s website shows that a discussion for digital asset accounting was indeed scheduled for May 11th. The discussion itself was live-streamed this morning, but archival footage of the meeting hasn’t been uploaded.
Saylor offered congratulations to the Bitcoin community for the result. He and many Bitcoiners expect that it could lead to a more welcoming accounting framework for institutional Bitcoin investment.
“This is amazing,” responded Dan Held, director of progress advertising at Kraken. “One step closer to making it easier for corporates to own Bitcoin on their balance sheet and account for it in a cogent manner.”
Benefits for Institutions
At present, corporations are required to report their Bitcoin holdings at their lowest price during a given reporting period. In other words, if Bitcoin fluctuates between $40,000 and $30,000 within a few months, businesses must report their holdings at $30,000, even if they are closer to $40,000 by the end of the period.
This can have a negative impact on the earnings report of any corporation that holds Bitcoin on its balance sheet. Such was the case for MicroStrategy, which reported a 2020 year-end Bitcoin value of $1.1 billion despite holding $2 billion worth by December 31st.
According to the FASB’s meeting handout, it had originally declined to add digital asset accounting to its technical agenda. However, its received three agenda requests for the topic since then, including one from seven members of congress in May of last year.
It is still unclear when exactly the FASB will review its accounting rules, or provide any new guidance.