Cryptocurrencies have now officially made a debut on the balance sheet of a central bank; could this lead to an entirely new cryptoasset reporting framework?
In Pictures via Getty Images
Recently it was discovered that Central Bank of the Bahamas had included its newly created cryptocurrency, known as the Sand Dollar, on its balance sheet during April 2020. Although the amount that was actually listed was only equivalent to $48,000, the implications of this inclusion are profound.
This revelation comes on top of the news of just how comprehensive blockchain projects are at the Federal Reserve Bank of Boston, where over 30 blockchains are in various phases of testing and evaluation for possible implementation.
Cryptocurrencies have moved quickly from the fringe to the mainstream conversation, taking the form of decentralized financing, stablecoins, and most recently, central bank digital currencies (CBDCs). Even as the ecosystem has rapidly accelerated, however, there is still ambiguity as to how exactly different types of cryptocurrencies should be treated from a reporting and disclosure perspective.
This ambiguity exists even as industry associations and regulators, including the Association of Internal Certified Professional Accountants (AICPA), the Financial Standards Board (FSB), the Bank for International Settlements (BIS), and the Public Company Accounting Oversight Board (PCAOB) have begun to issue thought leadership on the subject. Despite these recent publications, in addition to the numerous opinions issued by other securities and market regulators, there is not a definitive guide or framework for how cryptocurrencies should be valued and reported.
The Sand Dollar amount might have only been for the equivalent of $48,000, but with central banks across the globe moving quickly to develop and beta-test versions of central bank digital currencies, it is only a matter of time until the financial impact scales materially. Given that, it is worthwhile taking a look at a prevailing opinion for reporting as well as an alternative that might make sense for certain organizations.
Mark-to-market. Marking assets value to market, on the surface, seems to make logical sense as well as to be reflective of market realities. Marking assets to current fair market value already occurs for certain financial instruments, and in some cases entire asset classes, so this is not an abstract concept. This prevailing opinion by practitioners and firms, classifying cryptocurrencies as intangible assets, also incorporates this concept of adjusting value based on market changes.
That said, the price volatility (which does not have to be good or bad) associated with cryptocurrencies and the alt-coin market specifically tempers enthusiasm for this approach. Price swings might make for great headlines and commentary, but can cause headaches for merchants and individuals seeking to use cryptocurrencies as a medium of exchange. Coupled with the lack of price transparency for some thinly traded crypto, marking to market might not be as simple as it might appear.
Addressing the volatility issues is actually one of the primary selling points of stablecoins and CBDCs, and arguably has been a driving force behind the rapid growth and investment in these assets.
A new asset class. An alternative to what is basically trying to make a square peg fit into a round hole - classifying cryptocurrencies as intangibles and marking to market - would be to create an entirely new asset sector for the cryptocurrency space. Creating a new asset class might seem like an extreme reaction to the growth of cryptocurrencies, but upon closer examination it might make more sense than it initially appears.
Taking a look at cryptocurrencies, it is relatively clear that these financial instruments do not fit neatly into any existing accounting classification. Depending on the cryptocurrency that is examined, it may or may not have characteristics of equity securities, interest paying instruments (similar to preferred stock), interest bearing deposits, intangible assets, or something akin to airline miles or reward points. Put another way, the very innovative spirit that has catapulted the cryptocurrency space to its current prominence has also led to a relatively messy reporting conversation.
By creating a new asset categorization for cryptoassets, organizations and policymakers will both have an opportunity to start fresh and to actually create reporting and disclosure standards that make sense for blockchain and cryptocurrencies. For example, cryptocurrencies could be classified by use case, or be reported depending on trading volume and market capitalization. There might even be different reporting obligations depending on what cryptocurrency is being analyzed.
Think of the following for a moment. Generally speaking, the cryptocurrency space can be broken down into three areas, especially for non-expert users. There are cryptocurrencies such as bitcoin that are completely decentralized and untethered to underlying assets. In addition, there are stablecoins that are more centralized (issued by an organization) and are connected to some external asset. Finally, there is the growing field of CBDCs issued and governed by a nation state or central bank and (most likely) connected to the fiat currency of that nation.
Does it make sense for such radically different instruments to be categorized and treated the same?
That question should be top of mind for organizations, users, and regulators as these different iterations of cryptocurrency continue to develop, compete, and gain traction in the marketplace.
Read the original post:
- Island Vacations - The Official Website of The Bahamas - January 21st, 2021
- Bahamas Vacations - Hotels, Mega Resorts, and Fishing Lodges - January 21st, 2021
- Bahamas - United States Department of State - January 21st, 2021
- Bahamas to rebound 'faster' than its rivals - Bahamas Tribune - January 21st, 2021
- Bahamas Launches 'Live To Tape' Series Backed By The 400 Unit - JamBase - January 21st, 2021
- New seaplane operation takes flight in the Bahamas - Travel Weekly - January 21st, 2021
- Charli D'Amelio's Dad Marc Takes Blame For Highly Criticized New Year's Bahamas Vacation Amid The Coronavirus Pandemic - OK! - January 21st, 2021
- Charli DAmelios Dad Marc Speaks Out After Her Trip to the Bahamas Sparks Backlash Amid COVID-19: We Take It Seriously - Us Weekly - January 21st, 2021
- UB climate change expert warns Bahamas 30 years from irreversible climate effects - EyeWitness News - January 21st, 2021
- Bahamas & The 400 Unit Announce 'Live To Tape' Livestream Concert - JamBase - January 21st, 2021
- 'Polish what we have before tourists return' - Bahamas Tribune - January 21st, 2021
- Damianos Sotheby's International Realty announces top producers and listing agents for 2020 - EyeWitness News - January 21st, 2021
- Today's Livestreams, January 16, 2021: Bahamas, Robert Randolph, Forevergreen With The Avett Brothers & More - JamBase - January 21st, 2021
- Cooper urges govt. to come clean on Grand Lucayan sale - EyeWitness News - January 21st, 2021
- Albert 'Bert' Bell dies at his home in Grand Bahama - Bahamas Tribune - January 21st, 2021
- BAMSI students get hands-on with shark expedition - EyeWitness News - January 21st, 2021
- COVID travel measures 'won't ease in any way' - Bahamas Tribune - January 21st, 2021
- Simplified Lending touts advantages of credit bureau Eye Witness News - EyeWitness News - January 21st, 2021
- Bahamian women and spouses sue govt. over Fisheries Bill - EyeWitness News - January 21st, 2021
- Registration of NGOs opens door to greater funding opportunities - EyeWitness News - January 21st, 2021
- Op-Ed: Justice and a culture of caring - EyeWitness News - January 21st, 2021
- Lewis: Govt. working on Resilient Recovery Policy - EyeWitness News - January 21st, 2021
- Bahamas Will Only Allow Vaccine if it is Safe - Caribbean News - caribbeannationalweekly.com - December 8th, 2020
- Genting Malaysia's resort in the Bahamas to reopen on Dec 26 - The Edge Markets MY - December 8th, 2020
- Commission: UN vote signals new line of thinking for The Bahamas on marijuana - EyeWitness News - December 8th, 2020
- Sovereign default 'outside the realm' of fiscal possibility - Bahamas Tribune - December 8th, 2020
- Petition launched to protest Disney's plan for cruise destination in the Bahamas - NYCaribNews - December 8th, 2020
- Human Rights Bahamas calls for the release of Cameroon asylum seekers detained in The Bahamas - EyeWitness News - December 8th, 2020
- 30 more cases over three days Eye Witness News - EyeWitness News - December 8th, 2020
- New Facial Biometric Technology Will Make CBP Preclearance at LPIA more Efficient and Secure - US Embassy in The Bahamas - December 8th, 2020
- Governor warns on future tax increases - Bahamas Tribune - December 8th, 2020
- What will 750,000 buy in the Hamptons, Spain, Clontarf, London and the Bahamas? - The Irish Times - December 8th, 2020
- Initiative launched to improve entrepreneurial ecosystem and finance access - EyeWitness News - December 8th, 2020
- Government Of The Bahamas Statement On US Travel Advisory - PRNewswire - November 29th, 2020
- Too hard to get to The Bahamas - Bahamas Tribune - November 29th, 2020
- PM: Many will travel, but residents must protect The Bahamas - EyeWitness News - November 29th, 2020
- No clinical evidence of COVID reinfections in The Bahamas - EyeWitness News - November 29th, 2020
- Phoenix family's vacation to Bahamas cheaper than expected - AZFamily - November 29th, 2020
- US donates additional equipment towards COVID fight in The Bahamas - EyeWitness News - November 29th, 2020
- Foreign Affairs: Bahamas committed to equality Eye Witness News - EyeWitness News - November 29th, 2020
- PM: Govt needs these powers Eye Witness News - EyeWitness News - November 29th, 2020
- Bamboo Shack, Bethel Brothers Morticians join in on tablet donations - EyeWitness News - November 29th, 2020
- PM to meditate on new finance minister pick, decision by next week - EyeWitness News - November 29th, 2020
- DPM remains focused on work ahead Eye Witness News - EyeWitness News - November 29th, 2020
- What's New In The Islands Of The Bahamas This Winter - PRNewswire - November 24th, 2020
- INSIGHT: From persecution to prison to poverty a political refugee's five-year ordeal in The Bahamas - Bahamas Tribune - November 24th, 2020
- Joe Giudice Is Headed to the Bahamas in the New Year for Celebrity Boxing! - WSMV Nashville - November 24th, 2020
- US Donates Additional $20K to COVID Fight in The Bahamas - US Embassy in The Bahamas - November 24th, 2020
- Bahamas To Buy Off Hurricanes With Sand Dollars. - The St. Kitts-Nevis Observer - November 24th, 2020
- Limeade Bahamas provides breakfast for 400 in the Englerston community - EyeWitness News - November 24th, 2020
- BPC urged to stand down, warned of possible legal action - EyeWitness News - November 24th, 2020
- Forbes: We are not out of the second wave yet - EyeWitness News - November 24th, 2020
- Bahamas Paradise confirms the sale of Grand Celebration - Seatrade Cruise News - November 24th, 2020
- Grand Bahama cases double in two weeks Eye Witness News - EyeWitness News - November 24th, 2020
- The Bahamas gains a new fleet of national security drones - DroneDJ - November 24th, 2020
- PM affirms govt commitment to preschools, says Family Island preschools will receive same benefits as NP - EyeWitness News - November 24th, 2020
- BPC on track to spud exploratory well in six weeks - EyeWitness News - November 24th, 2020
- Former Sky Bahamas employees claim they are owed $740000 in back pay - EyeWitness News - November 24th, 2020
- Bahamas Professional Golf Association recognizes contributions of Albany Bahamas and Bakers Bay Golf and Ocean Club - EyeWitness News - November 24th, 2020
- WPT, MILLIONS Online, Russia and the Bahamas: Partypoker Releases Live and Online Schedule for 2021 - Pokerfuse - November 24th, 2020
- Baha Mar, The Leading Resort Destination In The Bahamas, Announces Its Reopening, Welcoming Back Guests Beginning December 17, 2020 - PRNewswire - November 7th, 2020
- CG to roll out covid-19 travel insurance in Bahamas - International Investment - November 7th, 2020
- Bahamas edged out by Turks and Caicos in popularity among American travelers in ranking - EyeWitness News - November 7th, 2020
- Smith: Outcome of US election has implications on The Bahamas' survival - EyeWitness News - November 7th, 2020
- Athletes aiming for Tokyo 2020 qualification receive funding from Bahamas NOC - Insidethegames.biz - November 7th, 2020
- Americans are Now Considering Bahamas Real Estate in The Midst of Uncertain Times - Yahoo Finance - November 7th, 2020
- GB off the beaten path? Is that all? - Bahamas Tribune - November 7th, 2020
- The Bahamas' Grand Hyatt Baha Mar to reopen in December - Yogonet International - November 7th, 2020
- The Bahamas Updated Their Visitor Guidelines a Day Before Opening to Travelers What to Know - FOX10 News - November 7th, 2020
- Atlantis employees to begin weekly COVID testing next week - EyeWitness News - November 7th, 2020
- Government signs agreement with ITU for national cybersecurity project - EyeWitness News - November 7th, 2020
- Church farm project aims to help people feed themselves - Bahamas Tribune - November 7th, 2020
- Govt. to expand testing protocols with SalivaDirect pilot program - EyeWitness News - November 7th, 2020
- UNDP and UWI post-disaster Bahamas Resilient Recovery Policy endorsed by Cabinet - EyeWitness News - November 7th, 2020
- Baleria Caribbean to Resume Passenger Sailings Between Port Everglades and the Bahamas - South Florida Caribbean News - October 27th, 2020
- Central Bank Digital Currency: The First Nationwide CBDC In The World Has Been Launched By The Bahamas - Forbes - October 27th, 2020
- SURGE: Bahamas records more than 1000 cases in less than two weeks - EyeWitness News - October 27th, 2020
- American Eagle ERJ145 Runs Off The Runway In The Bahamas - Simple Flying - October 27th, 2020
- Everything Fresh touts 'remarkable growth' in Bahamas - Loop News Jamaica - October 27th, 2020
- COVID Impacts Heavily on Government Business Says Bahamas - caribbeannationalweekly.com - October 27th, 2020