As per the latest development, the US regulators are working on improved accounting standards for Bitcoin (BTC) in order to effectively capture the rises and dips. The long-awaited accounting rules for Bitcoin and other cryptocurrencies are due in the US.
The new regulations shall come by the end of the year. They will mandate that companies holding or investing in cryptocurrency must disclose their holdings at fair value. This valuation method reflects the most current asset value, including potential rebounds in value following price declines.
Although these forthcoming standards are expected to introduce greater volatility into the financial reports of crypto-intensive companies, they represent an improvement over the existing practices, according to feedback received by the Financial Accounting Standards Board (FASB) from companies and accounting professionals over several months.
FASB stated that the rules will go into effect as soon as 2025, however, the companies still have the option to apply for them early. Speaking to Bloomberg, Jeff Rundlet, head of accounting strategy at accounting software company Cryptio said:
“It’s a great step forward for the entire crypto market. I think it’s a great step toward mainstream adoption. I can see finalizing this proposal to help large corporations that are maybe scared to hold crypto on their balance sheet because they’re scared of the technical complexities.”
Long Road to Bitcoin Accounting, Says FASB
FASB had previously declined three separate requests dating back to 2017 to establish regulations for cryptocurrencies, citing the limited material use of Bitcoin by companies. However, their stance evolved with significant investments in blockchain-traded assets by major corporations like Tesla and MicroStrategy.
The board’s scope remained limited, focusing on assets generated or residing on distributed ledgers utilizing blockchain technology, secured through cryptographic methods. These crypto assets must presently fall under the classification of intangible assets per US accounting standards and must be fungible, allowing interchangeability with assets of the same type.
Notably, the regulations do not encompass non-fungible tokens (NFTs), which are unique digital tokens representing various items, or stablecoins and wrapped tokens, which enable the use of crypto across different blockchains.
Despite pleas from several entities, including the Big Four accounting firms, to include wrapped tokens, FASB chose to exclude them from the final framework, asserting that they serve similar purposes and trade at prices akin to their underlying crypto assets.
On Wednesday, a majority of the FASB board members stated that they would need more information about the market. The members said that they would continue to monitor the crypto market and take action wherever necessary.
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