The Financial Accounting Standards Board (FASB) has given its approval to a long-awaited cryptocurrency asset standard, which will measure changes in the value of digital currencies such as Bitcoin held by companies. The decision, made on Wednesday, follows an exposure draft released in March and a standard-setting process that began in July 2022.
The new standard, which has been eagerly anticipated by stakeholders, will require entities with crypto assets within its scope to measure those assets at fair value and recognize changes in the fair value in net income each reporting period. The rules apply to cryptocurrencies like Bitcoin and Ethereum as well as stablecoins pegged to fiat currencies. However, non-fungible tokens (NFTs) and wrapped tokens providing claims on other crypto assets have been excluded from the scope.
While acknowledging that some stakeholders might be disappointed with the exclusion of NFTs and wrapped tokens, FASB member Susan Cosper noted on Thursday that keeping the project narrow had allowed them to deliver this information to investors sooner. Fellow board member Christine Botosan echoed these sentiments, emphasizing the importance of comprehensive disclosures for this unique asset class.
The final rules incorporate feedback from over 80 comment letters received during a public comment period. Most of the respondents indicated that the transition would not involve significant costs or effort due to existing processes for voluntary reporting or tax compliance.
The new rules are set to be effective for fiscal years beginning after December 15, 2024, with early adoption permitted. All public companies and private companies will need to adhere to these regulations.
This development follows increasing pressure from investors and other stakeholders, as major companies like Tesla (NASDAQ:TSLA), MicroStrategy, and Block (formerly Square (NYSE:SQ)) accumulated sizable Bitcoin holdings. In response to the news, MicroStrategy co-founder and executive chairman Michael Saylor tweeted that the upgrade to FASB accounting rules eliminates a significant impediment to corporate adoption of Bitcoin as a treasury asset.
The board's decision marks a significant milestone in cryptocurrency regulation and is expected to have substantial implications for entities that hold crypto assets.
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