Crypto: Currency or Intangible Asset?
View and Counterview
Late last year, FASB, the governing body of accounting standards in the United States, finally added some rules to allow companies to account for cryptocurrencies as company assets. For supporters of Bitcoin and other cryptocurrencies, this was seemingly a massive win. From this point forward, crypto legally can be counted as an investment for companies, meaning more companies would be willing to get some Bitcoin or Ethereum, knowing it would still show up on their balance sheet. However, read through the actual terms of the FASB standards, and cryptocurrencies are defined as intangible assets – such as goodwill, rather than as alternate currencies, which they seek to be recognized as. Which type of asset should crypto be treated as is a question that one should not take lightly, and in this article, I seek to provide my perspective as both a business and an accounting student, on what crypto actually is, in a view-counterview format.
Crypto is a Currency:
Some things really aren’t as deep as financial analysts or market pundits would have you believe. As per Wikipedia, “A cryptocurrency… is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on a central authority.” Simply put, cryptocurrencies are new currencies, they are meant, and are often used, as currencies, and this has been the case since their inception. On the internet and the dark web, Bitcoin and Ethereum are the default currencies, used for transactions both legal and illegal. Even beyond this, cryptocurrencies are beginning to gain widespread acceptance within the mainstream. In fact, Bitcoin is even considered legal tender in the nation of El Salvador, making it a legal, international currency. The only reason Bitcoin is not considered a currency by some is because economic conservatives are afraid to consider online-heavy currencies.
Critics of cryptocurrency often point out its volatility as a reason why it should not be a currency. This argument would make sense if we did not count volatile currencies as currencies. From the previous Zimbabwean dollar to the Argentinian Peso, volatile currencies are still currencies, and this fact is unlikely to generate any controversy. So why not a much more widely used currency that is officially recognized and growing in popularity?
Additionally, cryptocurrencies are hardly a traditional intangible asset, deriving their value not through any intrinsic worth, but for what they are valued at when traded. If it functions as a currency, is traded as a currency, is called a currency, and acts like a currency, it probably is a currency.
Crypto is a Typical Intangible Asset:
Just because I call myself an emperor doesn’t mean that I get treated as one. The same goes for crypto as well. The base standards for any wannabe currency to be acknowledged is that it must be standardized and widely accepted. Cryptocurrencies are hardly standardized. Sure, Bitcoin and Ethereum may be widely accepted (and that too, only within online crypto spaces), but beyond that, we see a million joke currencies that hardly have any credibility, standardization, and any serious acceptance. Imagine treating Dogecoin the same way you treat the Euro?
When it comes to the acceptance of crypto, the only place where they are often treated as a normal currency is within online circles, especially with illegal transactions. Who wants the Silk Road drug empire’s currency to now be treated officially? While El Salvador does acknowledge Bitcoin as a currency (and only Bitcoin, not crypto as a whole), it is not the main currency of El Salvador, and even if it was, that is only one nation of many.
The concept behind crypto is intriguing, but its very nature means it can never be taken in whole as a type of currency. Being decentralized means that there will always be many tokens floating around, some legitimate and accepted while others simply are scams from wannabe grifters. Even if some crypto coins are legitimate currencies following the aforementioned rules, their pathway to legal tender would have to be the exception, rather than the rule.
Finally, while standardized currencies may fluctuate, they are considered currencies because they are backed by (mostly) trusted institutions, typically governments. Without this backing, cryptocurrencies function exactly as intangibles, having no value except their assumed inherent value.
Where I Stand On This:
Personally, I am not much of a cryptoskeptic, and I find cryptocurrencies one of the most intriguing disruptive technologies in the world at the moment. However, I personally believe that there is much more work to be done in terms of standardization and acceptance before crypto can be considered a form of currency, if it is possible at all. Nonetheless, I am glad that cryptocurrencies are at least recognized by the FASB, as this provides some of the institutional legitimacy that crypto has so long struggled with.
I will leave you all with an interesting note, the FASB standards particularly state that for crypto to be recorded, it has to be fungible, likely to avoid companies from putting all their assets in NFTs! Oh well, NFTs are a story for another time. For now, I hope this article helped you when it came to providing a perspective on the current financial state of cryptocurrency acceptance within America’s financial standards.