New Crypto Accounting Rules Approved in the US

US crypto businesses will soon have clear accounting rules for their Bitcoin, Ethereum, and other digital coins, following a decision by US accounting leaders on Wednesday.

New guidelines expected by the end of the year will require companies with cryptocurrency to show their holdings' current value, capturing any increase in worth even after price drops. This update will make reports more volatile for crypto-focused companies, but it will be better than the old system, many experts told the Financial Accounting Standards Board.

“This is a rare chance to reduce costs and make information more useful," said FASB member Christine Botosan.

These rules will be active by 2025, but companies can use them sooner if they wish.

Jeff Rundlet from Cryptio said, "This is a big step for the crypto world. It will encourage big companies to include crypto in their assets without fearing its complexity."

Currently, there’s no US accounting rule specifically for companies like MicroStrategy, Tesla, or Coinbase about their crypto. Most companies follow a guide that treats crypto like trademarks or copyrights, items that aren’t often sold. This old method makes companies show their crypto at the price they bought it and reduces its value if prices fall. They can't increase its value if prices go up later.

With the new system, companies will give a clearer picture of their crypto value, helping investors decide better. MicroStrategy's CFO Andrew Kangsupported this new approach in a letter to FASB.

All businesses must follow these rules for the financial year starting after Dec. 15, 2024. When the rules are out later this year, companies can start using them.

Under the new rules, companies will separate their crypto assets on their reports, showing clearly how much they have in crypto. They will also tell readers about any significant crypto holdings and any limits on them every year. Additionally, they will provide more details on how they calculated their crypto's value.