What Impact Will the New U.S. Cryptocurrency Accounting Rules Bring?
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What Impact Will the New U.S. Cryptocurrency Accounting Rules Bring?
This article aims to analyze and compare the accounting classifications of cryptocurrency assets by U.S. public companies, along with their basis for selection and implications, before and after the issuance of ASU 2023 by the ASU.
Navigating Web3 tides with focused insightsAuthor: TaxDAO
With the development and popularization of crypto assets, an increasing number of companies are holding or using them to seek investment returns, improve payment efficiency, or expand business models. The United States is one of the largest and earliest markets for crypto assets globally. U.S. public companies vary in their holdings and uses of crypto assets—not only purchasing and holding mainstream cryptocurrencies such as Bitcoin for investment purposes (e.g., MicroStrategy, Tesla), but also accepting cryptocurrencies as payment for goods or services (e.g., Square), or leveraging platforms like Ethereum to develop blockchain-based applications (e.g., Thermo Fisher Scientific).
However, there has been significant variation and uncertainty regarding how U.S. public companies account for and disclose crypto assets. Due to the lack of specific guidance under U.S. Generally Accepted Accounting Principles (US GAAP) for crypto assets, different companies have adopted different accounting models, undermining comparability of financial information. To address this issue, the Financial Accounting Standards Board (FASB) approved a proposed Accounting Standards Update (ASU) in September this year—hereinafter referred to as the 2023 ASU—which requires certain qualifying crypto assets to be measured at fair value and separately disclosed.
This article aims to analyze and compare the accounting treatment of crypto assets by U.S. public companies before and after the issuance of the 2023 ASU, focusing on the following three aspects:
(1) The accounting classifications and methods used by U.S. companies for crypto assets prior to the ASU update;
(2) The drawbacks of pre-ASU accounting rules;
(3) The new accounting rules after the ASU update and its implications.
1 Current Accounting Classifications for Crypto Assets Used by U.S. Companies
1.1 Accounting Standards and Regulatory Requirements Applicable to U.S. Public Companies
U.S. Generally Accepted Accounting Principles (US GAAP), issued and maintained by the Financial Accounting Standards Board (FASB), constitute the authoritative set of non-governmental accounting standards that U.S. public companies must follow. US GAAP includes the following components:
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Accounting Standards Codification (ASC): The sole official source of US GAAP, covering accounting rules and guidance across various industries and topics.
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Accounting Standards Updates (ASUs): Communicate changes to the ASC, including modifications to non-binding or informal content issued by the U.S. Securities and Exchange Commission (SEC). ASUs themselves are not authoritative standards but explain how, why, and when FASB has changed US GAAP.
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Concept Statements: Guide the selection of economic phenomena to be recognized and measured in financial reporting by establishing objectives of financial reporting, qualitative characteristics of useful financial information, and other conceptual foundations, along with their presentation in financial statements or related disclosures.
In addition to complying with US GAAP, U.S. public companies must also adhere to rules and listing standards set by the U.S. Securities and Exchange Commission (SEC), including those related to corporate governance and audit committees.
1.2 Accounting Treatment of Crypto Assets Under Existing Standards
Prior to the FASB's 2023 update on crypto asset accounting, there was no uniform approach for accounting for crypto assets. In 2020, the American Institute of Certified Public Accountants (AICPA) established a Digital Assets Working Group and released a non-authoritative guide titled “Accounting and Auditing for Digital Assets” (hereinafter “the Guide”) to assist accountants in handling digital assets. According to the Guide, general crypto assets should be classified as indefinite-lived intangible assets. Indefinite-lived intangible assets are those without legal, regulatory, contractual, or similar factors limiting their useful life (such as trademarks, copyrights, or licenses). These assets are not amortized but require at least annual impairment testing to determine whether their carrying amount exceeds fair value. If impaired, an impairment loss must be recognized; however, any subsequent increase in value cannot reverse previously recognized losses.
The Guide also outlines accounting treatments for crypto assets in the following three scenarios:
First, crypto assets may be accounted for as financial instruments when they provide a contractual right to receive cash or another financial instrument (e.g., stablecoins), including the right to redeem stablecoins for cash from the issuer.
Second, certain broker-dealers holding digital assets for sale in the ordinary course of business may classify them as inventory measured at fair value, with changes in fair value recorded in earnings.
Third, entities meeting the definition of investment companies should determine whether acquired crypto assets represent debt securities, equity securities, or other investments and measure such investments at fair value.
Given the varying purposes for holding crypto assets, this article examines three typical types of companies that hold substantial amounts of crypto assets—long-term crypto investment firms, mining companies, and crypto asset exchanges—and analyzes their respective accounting practices.
1.2.1 Accounting Treatment of Long-Term Crypto Investment Companies
Companies that invest in crypto assets long-term do so not for speculation, but based on belief in their long-term value. Therefore, they typically classify crypto assets as indefinite-lived intangible assets and measure them at historical cost. If the market price declines during the holding period, an impairment loss is recognized. Examples include Tesla, Square, and MicroStrategy. Because prices of assets like Bitcoin are highly volatile, these assets often require impairment charges when prices fall—but appreciation cannot increase their carrying value. As a result, the book value of crypto assets accounted for as indefinite-lived intangibles tends to reflect the lowest market price, potentially distorting assessments of profitability and causing reported values to diverge significantly from actual market values.
For example, in its 2022 annual report, Tesla listed digital assets together with intangible assets under "non-current assets," reflecting its view that these digital assets (primarily Bitcoin) serve as potential long-term alternatives to cash rather than short-term financial instruments. Additionally, in Tesla’s cash flow statement, cash inflows and outflows related to Bitcoin purchases and sales are presented within investing activities (labeled as “purchases of digital assets” and “proceeds from sales of digital assets”).
1.2.2 Accounting Treatment of Mining Companies
Mining companies obtain crypto assets and then sell them into the market to generate profit. Like long-term investors, mining companies hold the same types of crypto assets (mainly Bitcoin), and thus historically apply the same accounting method—classifying them as indefinite-lived intangible assets. However, unlike Tesla, most mining companies (such as Bit Digital, CleanSpark, and Riot Blockchain) list their crypto assets as current assets, which contradicts the nature of intangible assets but better reflects the economic reality that these companies do not intend to hold crypto long-term but instead convert it into profits.
Regarding the conversion of crypto assets into profits, two approaches exist in the cash flow statement: either as “cash flows from investing activities” or “cash flows from operating activities.” Most mining companies use the former, while only a few (e.g., Coin Citadel) adopt the latter. Some analysts argue that treating crypto conversions as investing activities misrepresents core business performance because the crypto revenue stems directly from primary operations, not investments, thereby misleading investor decisions.
1.2.3 Accounting Treatment of Crypto Asset Exchanges
A typical example is Coinbase, whose main business involves providing a platform for trading crypto assets and earning transaction fees. Similar to mining companies, Coinbase must convert fee income—often received in crypto—into profit. According to its prospectus, Coinbase measures crypto revenue from transactions at fair value. Once accumulated crypto reaches a certain threshold, it is converted into U.S. dollars to mitigate financial risks associated with fair value fluctuations.
Additionally, like Tesla, Coinbase holds some crypto assets long-term, and accounts for those holdings using the same method as Tesla.
1.3 Conflicts With International Financial Reporting Standards (IFRS) and Lagging Nature of Current Rules
Reviewing the accounting treatment of crypto assets by U.S. companies before the 2023 ASU reveals notable conflicts with International Financial Reporting Standards (IFRS). The most apparent discrepancy lies in measurement methods. U.S. companies like Tesla value crypto assets using the cost model, where impairments are not reversed even if market values recover. In contrast, IFRS allows entities to measure intangible assets using either the cost model or, where applicable, the revaluation model. Since many crypto assets are actively traded, companies following IFRS typically use fair value measurement, which permits reversal of impairment losses. For U.S. firms using the cost model, unrealized losses depress reported profitability until disposal, potentially understating financial health.
Second, current standards lack clarity on balance sheet presentation of crypto assets. Classifying crypto as intangible assets may inadequately reflect liquidity. For instance, Tesla lists “digital assets” as non-current assets despite Bitcoin being highly liquid and easily convertible. Conversely, Bitmain, though stating its intent to “hold Bitcoin long-term,” classifies its digital assets as current assets in its prospectus. Thus, further standardization is needed on whether crypto assets should be classified as current or non-current.
Finally, existing rules fail to accurately reflect mining companies’ profitability. When mining firms convert Bitcoin revenue into USD, the resulting cash flows are often classified as “investing activities” instead of “operating activities,” distorting perceptions of their ability to generate cash from core operations.
2 The Release of the 2023 ASU and Its Impacts
2.1 Key Provisions of the 2023 ASU
On March 23, 2023, the Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update (ASU) titled “Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting and Disclosure for Crypto Assets.” This new rule was finalized in September and mandates that qualifying crypto assets be measured at fair value, with changes in fair value recognized in comprehensive income each reporting period. Qualifying assets must meet all of the following criteria:
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The crypto asset meets the US GAAP definition of an intangible asset;
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The holder does not have enforceable rights or claims to underlying goods, services, or other assets;
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The crypto asset resides on a distributed ledger based on blockchain technology;
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It is secured via cryptographic techniques;
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It is fungible, meaning interchangeable with other units of the same type;
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It is not created or issued by the reporting entity or its affiliates.
The new rule also requires crypto assets to be separately presented on the balance sheet and detailed disclosures in the notes, including specific holdings, restricted assets, fair value hierarchy levels, and related-party transactions.
The goal of this rule is to resolve the absence of specific GAAP guidance for crypto assets and eliminate inconsistencies arising from diverse accounting models, thereby enhancing comparability and reliability of financial reporting. FASB believes measuring crypto assets at fair value better reflects their economic substance and market volatility, improving relevance and credibility of financial statements.
The final ASU is expected to be officially released by the end of 2023 and will become effective in 2025 for both public and private companies holding or investing in crypto assets. However, early adoption will be permitted.
2.2 Impact of the 2023 ASU: A Critical Step Forward
Previously, TaxDAO published an article titled “Explaining the New Changes in U.S. Cryptocurrency Accounting Rules,” analyzing the accounting, tax, and practical implications of the 2023 ASU. Building on that foundation, this article focuses specifically on the impact of the 2023 ASU on industry-wide accounting practices.
As previously discussed, valuing crypto assets at cost leads to inaccurate reporting. The revised standard aligns directly with IFRS practice by adopting fair value measurement to more accurately reflect corporate value. However, compared to the cost model—which requires only annual impairment testing—fair value measurement demands frequent reassessment of asset values and recognition of unrealized gains or losses, increasing the burden on corporate accounting systems. For long-term holders like MicroStrategy and Tesla, the new method could significantly boost reported profits.
Although the 2023 ASU does not resolve all existing issues—for example, it does not clarify treatment of asset liquidity, nor does it cover NFTs, wrapped tokens, or other emerging crypto assets—it represents a crucial first step toward regulating crypto asset accounting. As the saying goes, every journey begins with a single step. By addressing common characteristics of cryptocurrencies, the 2023 ASU sets a solid precedent. Only once consensus is reached in broad areas can niche domains build upon mature frameworks to achieve sustainable regulation.
Beyond resolving domestic inconsistencies, the 2023 ASU carries significant implications for global accounting harmonization. Currently, the two major accounting frameworks used or referenced internationally are U.S. GAAP and International Financial Reporting Standards (IFRS), which differ in several respects, leading to inconsistent accounting treatments for the same economic events across jurisdictions and affecting the quality and comparability of financial information. The issuance of the 2023 ASU brings U.S. crypto asset accounting closer to IFRS, particularly in adopting fair value measurement and allowing reversal of impairment losses. This helps narrow the gap between the two frameworks and enhances international accounting convergence. It also provides a reference point for other countries or regions developing or refining their own crypto accounting standards, promoting the growth and standardization of the global crypto industry.
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