Today, the Financial Accounting Standards Board (FASB) announced new rules that will require companies to account for cryptocurrencies like Bitcoin at fair value. The rules are set to go into effect on December 15, 2024, but companies will be able to apply them earlier than that.

Under the new guidelines, which are the first of their kind in the United States, businesses will need to disclose the value of cryptocurrencies based on their market prices at the end of each reporting period. This move aims to provide greater transparency and accuracy in financial reporting, acknowledging the volatile nature of digital assets like Bitcoin.

Previously, the old treatment accounted for Bitcoin as an intangible asset, which meant if the price went lower than what companies bought it for, they had to take an impairment charge on their books, even if they didn’t sell. But if the price went up, they couldn’t receive any benefit on their books unless they sold. Now, with fair value accounting, periodically (i.e. every quarter) companies can report the unrealized gains and losses to get an actual benefit on their books if the price of the asset increases (without having to sell to capture it). This could make companies more likely to add bitcoin to their balance sheet and become long-term holders as they can report the appreciation without having to sell anything.

“It’s just a phenomenal time of year to get this holiday gift of commonsense accounting,” reportedly said Edward McGee, CFO of Grayscale Investments LLC.

Investors and regulators will now have access to more timely and accurate information about the financial health of companies holding Bitcoin. This increased transparency is expected to foster greater trust and confidence in the industry, which has often been plagued by concerns over its lack of oversight and regulation.

However, implementing fair value accounting for cryptocurrencies is not without its challenges. The volatility of Bitcoin and other digital assets means that companies will need to invest in robust valuation methods and procedures to ensure accuracy in their financial reporting. Additionally, auditors will need to develop expertise in assessing the fair market value of these assets, which can be a complex task.

Despite these challenges, the introduction of fair value accounting rules for Bitcoin and other cryptocurrencies is a significant step forward for the industry.

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In a long-anticipated move, Bloomberg Tax reported that the Financial Accounting Standards Board (FASB) is set to introduce new fair value accounting rules for Bitcoin and other cryptocurrencies. These new rules aim to provide a more accurate reflection of the market value of digital assets and bring greater transparency to the financial reporting of companies that hold cryptocurrencies. 

The rules, expected to be published by the end of the year, are set to go into effect as soon as 2025, but companies will be able to apply them earlier than that, the report said.

For years, the valuation of cryptocurrencies like Bitcoin has been a challenging aspect of financial reporting for companies. The volatile nature of these digital assets has made it difficult to accurately assess their fair market value. Under the current accounting standards, companies often struggled to present a true picture of their financial health, as the value of Bitcoin and cryptocurrencies fluctuated wildly.

The FASB’s move to introduce fair value accounting rules will require companies to regularly assess the fair market value of their digital assets and report any fluctuations in value as part of their financial statements. This means that if the price of Bitcoin surges or plummets, companies will have to reflect these changes in their financial reports, providing stakeholders with a more accurate picture of their financial position.

The old treatment accounted for Bitcoin as an intangible asset, which meant if the price went lower than what companies bought it for, they had to take an impairment charge on their books, even if they didn’t sell. But if the price went up, they couldn’t receive any benefit on their books unless they sold. Now, with fair value accounting, periodically (i.e. every quarter) companies can report the unrealized gains and losses to get an actual benefit on their books if the price of the asset increases (without having to sell to capture it). This could make companies more likely to add bitcoin to their balance sheet and become long-term holders as they can report the appreciation without having to sell anything.

Investors and regulators will now have access to more timely and accurate information about the financial health of companies involved in the Bitcoin space. This increased transparency is expected to foster greater trust and confidence in the industry, which has often been plagued by concerns over its lack of oversight and regulation.

The move towards fair value accounting also aligns with the growing acceptance of Bitcoin in mainstream finance. As it become more integrated into the global financial system, it is essential that accounting standards evolve to accommodate digital assets. The FASB’s decision to implement fair value accounting rules is a recognition of the maturing market and its importance in the broader economy.

However, implementing fair value accounting for cryptocurrencies is not without its challenges. The volatility of Bitcoin and other digital assets means that companies will need to invest in robust valuation methods and procedures to ensure accuracy in their financial reporting. Additionally, auditors will need to develop expertise in assessing the fair market value of these assets, which can be a complex task.

Despite these challenges, the introduction of fair value accounting rules for Bitcoin and other cryptocurrencies is a significant step forward for the industry. It will provide much-needed clarity and transparency, ultimately benefiting investors, companies, and regulators alike. As the Bitcoin market continues to grow and evolve, having a standardized accounting framework in place is essential to maintain trust and ensure the responsible integration of BTC into the global financial system.

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This is an opinion editorial by Hannah Wolfman-Jones, author of “System Override: How Bitcoin, Blockchain, Free Speech, & Free Tech Can Change Everything” and founder of We The Web.

Can academia fairly consider Bitcoin?

No. Or at least, not yet.

Academia has a huge and inherent bias against Bitcoin that it has yet to acknowledge. Academics — particularly academic economists — are the central planners who advise and run fiat monetary institutions. As such, they are often blind to the drawbacks of decentralization. Bitcoin not only threatens academic economists’ revolving door with fiat monetary institutions, but their egos and research too. As Ashley Hodgson, associate professor of economics at St. Olaf College and moderator of the HxEconomics Community at Heterodox Academy, explains in a draft chapter of an upcoming book: 

“To consider Bitcoin, one must change the question from, ‘What would I do if I controlled the money supply?’ to ‘Should anyone (including economists like me) be able to control the money supply?’ In this way, Bitcoin is potentially disempowering to the economist thinker… Even for the thought experiment to limit the power and status of one’s profession (academic economists) and one’s peers is something that may have a negative taste for people who spent so many years and gave up so many other life opportunities to enter this profession.

“Academics work hard in their early careers to publish and bring new ideas to bear… The newest, freshest ideas can sometimes knock the old ideas aside, which is against the interests of the senior academics, whose own sense of identity rests on the importance and correctness of their ideas. As such, cunning new ideas and brilliant young academics pose a threat to more senior academics in their roles as thought leaders, particularly if the new ideas displace the prestige of the old… Egos play a big role in the academic setting, particularly because we are essentially paid in prestige instead of money. Most economists could make more money by moving to industry. They stay in academia for the glory and influence… (Junior economists) know that they are most likely to rise within their profession if their ideas and research topics support the existing paradigm, therefore not posing too big of a threat to the senior colleagues deciding on their tenure case. By the time anyone is up for tenure, they have built a body of thought that they now identify with. While they have the freedom, potentially, to stray from that, the ideas may have solidified in their worldview.”

Unsurprisingly, academia’s study of Bitcoin thus far has been sorely lacking and what research has taken place has — with few exceptions — been cursory, unreliable and decidedly anti-Bitcoin. Flawed research based on misunderstandings about how Bitcoin works are being used as the basis of peer-reviewed, academic and government research papers and ossified within academia as these error-ridden papers are cited in subsequent academic research.

Actual experts in Bitcoin, who overwhelmingly are not in academia or government, are not considered “peers” by the credential-focused, hierarchical academic system and thus cannot contribute to academia’s peer review. There have been egregious examples of academia publishing research into reputable journals that are, as Reason had noted, “outlandish and provably false.” This “logically flawed” research (conducted and reviewed by academics who do not adequately understand the basic workings of Bitcoin) gets published and propagated widely within academia and the media. Reason surmises that “apocalyptic” and “fundamentally wrong” Bitcoin research is given a veneer of credibility by academia “as a strategy by economic, media, and political elites to undermine a powerful new form of money that they can’t control.”

Is Academia A Lost Cause For Understanding The Future Of Economics?

In some ways, yes. Academics are mostly ignorant of the paradigm shift brought on by Bitcoin and how it provides an alternative to (and thus is a threat to) authoritarian global monetary forces, including the petrodollar, subjugation of the developing world via IMF and World Bank loans (see the book “Confessions Of An Economic Hit Man” for more), the Cantillon effect and central bank digital currencies (CBDCs) advancing social credit systems and “The Great Reset.”

Academics often summarily dismiss such authoritarian fiat forces as “conspiracy theories” — a realm they don’t consider worthy of inquiry. Since academics are nearly universally from the developed world and in good standing with powerful governments (having high social credit) they are never confronted with the oppressive nature of fiat control in their own lives. Thus, academics are largely blind to the pitfalls of fiat and the benefits of Bitcoin as an uncontrollable monetary system.

In other ways, though, no, it’s not a lost cause. The professoriate is far from a monolith and most of them are highly intelligent and curious people dedicated to pursuing truth who sincerely want to better the world. Most economic professors have no intention of working for the IMF, Federal Reserve or similar fiat institutions, so they are not particularly conflicted themselves.

Bitcoin has made some inroads into universities already, as there are many independent thinkers within academic ranks. For example, Texas A&M does astute and extensive technological and economic research into Bitcoin, even having a “Bitcoin class” dedicated to it. Academics from many different universities have banded together in the Bitcoin Policy Institute resulting in high-quality and in-depth Bitcoin research.

There are also some academics who do not understand/appreciate Bitcoin, but find value in increasing viewpoint diversity in order to improve the quality of research produced and may be receptive to more inclusion of Bitcoin as a topic. Notably, there are thousands of professors with Heterodox Academy, a nonprofit dedicated to open inquiry, whom I hope will soon recognize academia’s yet-unacknowledged strong bias against Bitcoin.

While these newer research pursuits will not be incorporated into formal economic curricula anytime soon, they are discussed extensively in academic spheres. Bitcoiners have much they can learn from academia about the fiat system, which will continue to dominate for a long time. Professors are actual experts in the fiat system and often influential advisors to it. Notably, they will advise government officials and the unelected global elite on CBDCs and policies dealing with cryptocurrency and managing the fiat system through upcoming challenges. Bitcoiners can also cognitively benefit from listening to informed opinions that run contrary to their own.

This is a guest post by Hannah Wolfman-Jones. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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Tesla’s latest filing with the U.S. Securities and Exchange Commission (SEC) shows that the fair market value of the company’s bitcoin holdings was $191 million at the end of 2022. In addition, billionaire Elon Musk’s electric car company recorded $204 million of impairment losses resulting from changes in the prices of bitcoin.

Tesla’s Digital Assets and Its Bitcoin’s Fair Value

Elon Musk’s electric car company, Tesla (Nasdaq: TSLA), filed its annual report for the year ended Dec. 31, 2022, with the U.S. Securities and Exchange Commission (SEC) on Monday.

The filing shows that the fair market value of Tesla’s BTC holdings was $191 million at the end of 2022 while their carrying value was $184 million, as Bitcoin.com News previously reported. “As of December 31, 2022, and 2021, the carrying value of our digital assets held was $184 million and $1.26 billion, which reflects cumulative impairments of $204 million and $101 million, each period, respectively,” the company detailed, elaborating:

The fair market value of such digital assets held as of December 31, 2022 and 2021 was $191 million and $1.99 billion, respectively.

The filing also notes that during the two years ended Dec. 31, 2022, Tesla “purchased and/or received an immaterial amount and $1.50 billion, respectively, of digital assets.”

The electric car company invested $1.5 billion in bitcoin in Q1 2021 but sold 75% of its holdings in Q2 2022. The company also accepts the meme cryptocurrency dogecoin (DOGE) for some merchandise, which accounted for an “immaterial amount” of digital assets as stated in the SEC filing.

Tesla’s $204 Million in Impairment Losses From Bitcoin

The electric car company explained that digital assets are considered “indefinite-lived intangible assets under applicable accounting rules.” Therefore, “any decrease in their fair values below our carrying values for such assets at any time subsequent to their acquisition will require us to recognize impairment charges,” Tesla described, adding:

In the year ended December 31, 2022, we recorded $204 million of impairment losses resulting from changes to the carrying value of our bitcoin and gains of $64 million on certain conversions of bitcoin into fiat currency by us.

Since its BTC acquisition, Tesla only sold its bitcoin once, which was in the second quarter of 2022. The company sold 75% of its bitcoin holdings which added $936 million in cash to its balance sheet. CEO Elon Musk explained at the time that the company is “certainly open to increasing our bitcoin holdings in [the] future,” noting that the sale was due to concerns about the company’s overall liquidity, “given Covid shutdowns in China.”

Tesla’s SEC filing also states:

We may increase or decrease our holdings of digital assets at any time based on the needs of the business and our view of market and environmental conditions.

Do you think Tesla should buy more bitcoin? Let us know in the comments section below.

Kevin Helms

A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.