We got massive snow this week inside the Beltway. It seems a bear market winter is also coming for crypto markets. Feels a lot like when my kids smacked me in the face with a snowball yesterday. All we can do is HODL and trudge forward.
—Institutional Adoption of Crypto w dividends, GAAP reform necessary
Big step forward in institutional adoption of crypto this week as BTCS announced a Bitcoin dividend. Get ready for more bividends to come. A few public companies hold about $9 billion of bitcoin on balance sheet.
A substantial obstacle to them owning more is that GAAP’s accounting approach to crypto is busted (kudos to Chamber of Digital Commerce for their letter to FASB asking for greater flexibility). Unless you’re a broker dealer, AICPA guidance suggests a public company generally has to account for crypto holdings as intellectual property (software). That’s no fun, as it means you have to write down the value (impairment) when the market goes down, but you don’t get to write it up again when the market recovers.
The folks at the Financial Accounting Standards Board are smart and they get it. (I’m biased as I serve on their advisory committee FASAC.) FASAC had a meeting with the FASB Board members on GAAP treatment of crypto last year. There are many alternative ways to potentially account for public company crypto holdings depending on use, maybe as an investment (in which case mark to market if liquid market), maybe as inventory, maybe as currency (for stablecoins) or as a new quasi-currency category which would be really cool. Who knows. FASB moves slow, it will take years for new rules to be implemented, but my sense for now is that FASB is at least open to reform.
—Crypto Crime Report from Chainalysis should be like hot cocoa for wary pension funds
Bloomberg piece suggests today that pension funds are worried about crypto security as they think about whether to jump in. Chainalysis is just in time with a new report on crime in crypto, lots of interesting insights in there. The headlines all focused on the absolute size of crime in crypto. Which is frustratingly misleading, because the percentage of crime in the digital asset space decreased, and remains a lower percentage of total activity than traditional markets.
Neeraj Agrawal sets the media narrative straight:
—Horse and Buggy Commission
Wrote an op-ed in Law360 today. I was a little snarky, and compared the SEC to a hypothetical Horse and Buggy Commission during the adoption of automobiles. But SEC Chair Gensler is a good sport. Skip the paywall and read for free here.
—Ignore crypto volatility. Relax. And Dance. Like Chair Gensler