FASB's crypto accounting reform could boost corporate BTC investments.

Kapil334

A Wall Street research firm and one of the largest Bitcoin proponents in the US corporate world are saying that there has been a significant change in the accounting of Bitcoin (BTC) and other cryptocurrencies owned by US companies, which could make them more willing to purchase them.

Currently, accounting standards only allow companies to record the increase in the value of their digital assets when they are sold - though at least annually reflecting a loss. But on Wednesday, the Financial Accounting Standards Board (FASB) voted to take a different approach, allowing companies to use fair value accounting, enabling them to immediately show gains and losses on their income statements.

"This decision is a significant step forward," said analysts at Stifel. They noted that US Generally Accepted Accounting Principles (GAAP) force companies to impair the value of crypto assets when prices fall, but if prices subsequently rise, it does not allow them to reverse these impairments - meaning the value reflected on the balance sheet could be significantly lower than the market prices of these assets.

"We may see increased acceptance among US companies of holding digital assets on their books, particularly during hot markets, as the impact on profits improves," the Stifel team said.

Michael Saylor, the CEO of MicroStrategy (MSTR), who began adding Bitcoin to his company's balance sheet about three years ago, is less cautious. He said the rule update "eliminates the primary obstacle to corporations adopting Bitcoin as a financial asset."

The Stifel team pointed out that at the end of the second quarter, MicroStrategy had about 152,300 Bitcoins on its books, valued at $2.3 billion, 50% less than the then-average market value (i.e., $2.3 billion).

One caution about the potential for corporate adoption of cryptocurrencies is the risk aversion of CEOs and other senior executives, whose compensation is tied to running the business, conservatively investing reserves, and providing at least somewhat predictable returns.

Jatin255

I think that corporate investment in the cryptocurrency space may not align with the company's core values, right?

Janak9955

Investing in BTC can also be very profitable.