An upcoming change by FASB could benefit Bitcoin-holding firms tremendously. Artur Widak—NurPhoto via Getty Images
The Financial Accounting Standards Board, an outfit known as FASB that helps create rules for corporate bookkeeping, published a bulletin on Wednesday about implementing a long-awaited rule change that will benefit firms that hold Bitcoin and other cryptocurrencies.
Under the current accounting regime, firms such as Tesla and Block that hold Bitcoin must report a loss in earnings reports if the digital asset drops in value during a given time. At the same time, they can’t record a profit if the price goes up. In practice, this means that a company that bought Bitcoin at $25,000 and saw it dip to $20,000 must maintain the lower value on its balance sheet—even if the price soars to $40,000 right after.
The price of Bitcoin, which jumped on the FASB news, was a little over $42,000 at midday on Wednesday. Tesla owns around 10,000 while Block has about 8,000, and as both firms acquired most or all or their Bitcoin holdings at a lower price, they stand to reap a gain when the new rules are enacted, according to FASB, “for fiscal years beginning after December 15, 2024.”
The biggest beneficiary of the rule change is set to be MicroStrategy, a one-time cybersecurity firm that pivoted to acquiring large amounts of Bitcoin several years ago. The firm says it currently owns nearly 160,000, which it acquired at an average cost of just under $30,000—which at current prices would be a net of almost $2 billion.
The forthcoming rule changes have been expected for months, but the share price of MicroStrategy nonetheless jumped 5% on the news. Shares of Tesla and Block, whose Bitcoin holdings represent only a small portion of the value, were down slightly.
The price of Bitcoin, historically been volatile, is up around 180% this year as the crypto market appears to be covering from a wave of scandals and ongoing regulatory scrutiny. Bitcoin fell to a low of around $16,000 last December after reaching its all-time high of roughly $69,000 in the fall of 2021.
The FASB announcement also may encourage other corporations to include crypto as part of their corporate treasuries since the ability to record it at fair market value will eliminate a significant impediment to of holding it.
“This upgrade to accounting standards will facilitate the adoption of [Bitcoin] as a treasury reserve asset by corporations worldwide,” Microstrategy CEO Michael Saylor wrote in response to the news.
FASB’s forthcoming update will be the first it’s issued for crypto nearly a decade. When the body first issued guidance for crypto, it classified digital assets as “intangible” and in the same category of trademarks and goodwill, which likewise is marked down in the event of a drop in value but not marked up if the value rises.
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