Accounting Drill Prevents Wider Acceptance of BTC

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Accounting Drill Prevents Wider Acceptance of BTC

Accounting companies are barring corporations from reserving cryptocurrencies like Bitcoins as assets. Although Tesla Inc. of Elon Musk and MicroStrategy Inc. are permitted to hold Bitcoin reserves, these are just exceptions. Despite restricting corporations from storing Bitcoin assets, the accounting firms allow venture capital companies like SoftBank Group Corp. and more to invest in volatile cryptocurrency assets. According to survey reports, only around 5% of finance executives seek to invest in Bitcoin assets this year.

The restrictive approach of the accounting firms is acting as a bar on the mass adoption of cryptocurrencies like Bitcoin and more as companies are letting go of their Bitcoin asset reserves for fear of accounting risks like big asset write-downs. The writing down of assets is a major loss for many companies. If a company buys Bitcoin worth $60,000 and ends the financial quarter with Bitcoin at $35,000, its investments need to be documented to the amount of $35,000 per token. There can be no writing up of the company’s investments even if the price of the cryptocurrency rises to $60,000. Writing up of investments can be done only when the company sells off the cryptocurrency assets. On the other hand, traditional assets like stocks can be written up or down depending on the market price.

Generally, intangible assets like Bitcoin are linked with the operations and activities like marketing, maintaining customer relations, inculcating technological skills, and more of the company. At present, there is no official regulation regarding the accounting drill according to the Generally Accepted Accounting Principles that govern the methodology of accounting for cryptocurrency assets by companies. The accountants are acting upon a consensus to bar the consideration of cryptocurrencies as financial instruments or cash. According to them, cryptocurrency is an intangible and indefinite asset that lacks physical substantiality.

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