This is the biggest crypto-related news piece this week - by far -, but from what I've gathered on Threads and X, there are some Hivers who don't see the full picture about this, so let's dumb it down a little bit.
Bitcoin came here to stay, first the powers that be and the system that is, deemed it a joke, then they called it dangerous, then they underestimated it and called it a bubble. Afterwards, they tried to regulate the shit out of Bitcoin to half avail, finding pushback on every step of the road.
We are at a point where Traditional Hedge Funds and Investment Managing Firms are filing for a Bitcoin and Ethereum ETF. They want in. If you can't win, join the winners or something, I guess. Now, the FASB (Financial Accounting Standards Board) has made a significant announcement that could reshape the way traditional businesses account for their cryptocurrency holdings.
Enter the Fair Value Accounting method for Bitcoin
The FASB introduced a new way of accounting for Bitcoin holdings, allowing the use of the Fair Value Accounting method for cryptocurrencies. This has far-reaching implications for corporate adoption and the broader cryptocurrency ecosystem.
Traditional, who play by the book companies used to have to account for crypto at their entry price and use the historical cost of the asset, and given the volatility of Cryptocurrencies in general, this represented a bigger risk than the reward of holding Bitcoin. Remember that most national monetary, Financial and Fiscal systems run on dinosaur policies, and bleeding edge technologies represent too big of a risk for the companies who play fair and square. This change acknowledges the dynamic and volatile nature of crypto and aims to provide a more accurate representation of a company's financial position.
Exactly what the Corpos want
Now don't be fooled. The FASB is a US entity. Everything that gets implemented in the US is the product of lobbying and corruption and it will benefit the elite, not as a result of the system wanting to improve the quality of life of the Average Joe or the fringe Satoshi.
Of course, this Fair value accounting coming to Bitcoin is positive for the crypto industry, but the fact that it was announced right before BTC ETFs, after two black swan events that drained both Retail and old money in the span of a year - read Luna and FTX stories if you've no idea what I'm talking about - and at the tailgate of the longest crypto bear market in history, makes me wonder if this was all orchestrated.
It would almost seem like they want to control the narrative and the bulls once they come, calling the shots, the tops and the bottoms. They are in for a big surprise, unless they have their fingers so deep on this cake that indeed Crypto is now another 100% manipulated market just like stock, bonds and real estate.
As I said, this is a net positive for crypto, this change is expected to encourage more companies to consider Bitcoin as a viable treasury asset, thus accelerating the mainstream adoption of cryptocurrencies.
I guess maybe I'm just too big of a conspiracy theorist at this point in life. But man, I've been right on every turn of the road, I've learnt to doubt and mistrust the real reasons of news pieces like this one, and I've learnt to expect the worst case scenario for the little guy when it comes to assessing the possible outcomes that changes like this one bring.
But let's break this down step by step so the average non-finance bro understands this Fair Value bananas:
New Accounting Rules for Bitcoin:
US accounting standard-setters have introduced accounting rules specifically tailored for businesses that hold or invest in Bitcoin and other cryptocurrencies.
Imagine you have a collection of rare football (the real one, the one with a rounded ball) cards. You used to write down how much they cost you when you bought them, just do that you knew how much money have you spent in this useless hobby. But now, instead of just focusing on what you paid, you'll also consider how much others would pay for them today. That's what this new rule does for Bitcoin – it helps companies keep track of how much their Bitcoin is worth right now.
Reporting at Fair Value:
Companies are now required to report their Bitcoin holdings at fair value, reflecting the most current market value of the asset. This approach accounts for value rebounds after price drops, ensuring a more accurate financial portrayal.
Think of Bitcoin like a roller coaster. Sometimes it goes up, sometimes it goes down, and you want to know exactly how much it's worth when you're looking at it. With these new rules, companies must tell you the most current value of their Bitcoin. So, if Bitcoin takes a dip but then goes up again, they'll show you the higher value.
Implementation and Early Adoption:
While these rules will officially take effect from 2025, companies have the option to adopt them earlier, signaling a more proactive approach by industry players.
This is like deciding to upgrade to a new phone before their old one stops working. Whoever does it is signaling that they want to stay ahead of the game, and maybe even plan to buy Bitcoin considering that the BTC ETF is in the horizon.
Addressing Rulebook Gaps:
Right now, there is no specific US accounting rulebook guidance for crypto asset accounting. The introduction of fair-value reporting will provide investors with a more relevant view of a company's financial position regarding their Bitcoin holdings.
The US is not the center of the world but they are definitely a Key player in crypto. The 3 letter agencies have been cracking down on Crypto for a while now, pushing out innovation from the country. Every US based company likes to play by the rules - if they don't they get screwed big time - is now able to account for BTC and still avoid any legal issues.
Mandatory Adoption:
All companies, whether public or private, will need to comply with these rules for fiscal years beginning after December 15, 2024, effectively implementing them by 2025 for calendar year companies.
See where this is going? Anything that is mandatory is following an agenda and pushing a narrative. We'll find out what are both of these when the time comes.
Disclosure Requirements:
Companies must create a separate entry for crypto assets on their balance sheets and disclose significant Bitcoin holdings along with any related restrictions in their financial footnotes. They must also annually disclose changes in opening and closing balances of crypto assets.
Scope of the Rules:
FASB's rules encompass assets on distributed ledgers based on blockchain technology, secured through cryptography, which are currently classified as intangible assets under US accounting rules. Non-fungible tokens (NFTs), stablecoins, and wrapped tokens are excluded.
Yep, your shitcoins, your algo stable tokens and your Ape/Punk JPEGs do not fall into this category.
The FASB's decision to create crypto accounting rules stems from the increasing interest of major companies in Bitcoin and other cryptocurrencies. The board will continue to monitor the crypto markets, potentially introducing further rules in the future - because there will be a lot of tweaks to these rules.
The introduction of these new accounting rules for Bitcoin and alternative cryptocurrencies represents a pivotal step towards mainstream adoption. It provides clarity for companies holding or investing in Bitcoin, making it easier for them to incorporate digital assets into their financial strategies. As businesses increasingly embrace cryptocurrencies as legitimate assets, the crypto ecosystem stands to benefit from greater institutional participation and acceptance. This development underscores the transformative potential of blockchain technology and its role in reshaping traditional financial paradigms.
All I'm wondering is, wasn't Crypto and Blockchain supposed to be a silent revolution against the current system, the underlying and unbreakable status-quo, and the draconian monetary policies that benefit only a few?
With all the happenings in 2023, I can't help to wonder if we, as a cryptospace, are giving away our very foundations in exchange for mass adoption.
It would seem like Crypto is becoming part of the current system, instead of being the counter system driven by the counter culture.
The 3 letter agencies are now joining the revolutionary ranks, but in the meantime, the revolutionaries are getting too entangled with the agencies.
I just hope that we don't end up being the two sides of the same coin. It sure does look like it's going to end up being exactly that.