In a major win for cryptocurrency and its investors, the U.S. Financial Accounting Standards Board (FASB) announced on December 13 that cryptocurrency holdings will have Fair Accounting Value starting next year. This means that companies with cryptocurrency holdings will have their assets reflected accurately – and further signifies that crypto’s legitimacy is increasing in leaps and bounds.
Previous FASB rules held that cryptocurrency was classified as an indefinite-lived, intangible asset, which resulted in the accountable value of crypto holdings going down when market prices went down but not up when they went up. As a result, companies with cryptocurrency holdings could not report the accurate value of their assets whenever there was an increase in value. This led to clear problems for companies with significant cryptocurrency assets and, as such, became a top priority for FASB to address and resolve.
The FASB began consideration of the rule change back in December 2022, and just completed the approval process for adopting Fair Accounting Value practices.
“The new standard responds to feedback from stakeholders of all backgrounds who indicated that improving the accounting for and disclosure of crypto assets should be a top priority for the Board,” stated FASB Chair Richard R. Jones in a media release. “It will provide investors and other capital allocators with more relevant information that better reflects the underlying economics of certain crypto assets and an entity’s financial position while reducing cost and complexity associated with applying current accounting.”
While private and small investors will be less directly affected by these rules changes, there already are indirect effects as new cryptocurrency adopters are entering the field on the basis of crypto’s increased credibility in the financial realm.
“This upgrade to accounting standards will facilitate the adoption of BTC as a treasury reserve asset by corporations worldwide,” tweeted Michael Saylor, largest holder of public BTC assets and the CEO of data firm MicroStrategy.
For investors of all sizes, cryptocurrency is becoming a natural complement to fiat currencies, particularly in countries that are struggling with inflation. By diversifying between fiat and cryptocurrencies, investors are able to mitigate the effects of inflation and reduce their risk if one form of currency goes south suddenly.
With big companies, governments, central banks, and hedge funds now more willing to come on board, the value of cryptocurrency will invariably increase. Along with leading to increased profits, the new rules are a stepping stone toward a regulatory framework in the U.S. as the widespread adoption of cryptocurrency will require it. Once regulations are established, prospective crypto investors will feel all the more comfortable buying in.
On top of the possibility of U.S. regulations passing in the near future, Bitcoin will be halving in the spring, which has historically driven its value up further. It’s one of many conditions that investors are looking at with anticipation that the cryptocurrency market will be booming in the coming year.