Bitcoin as a treasury reserve asset – challenges for corporate treasurers

A few weeks ago, we discussed the rising trend of Bitcoin being used as a treasury reserve asset. Since then, a few more companies have jumped on the bandwagon, with others hinting at similar plans. However, there are still some challenges for corporate treasurers that need to be addressed, which will be for the focus of this note. 

With Michael Saylor’s MicroStrategy announcing yet another USD 700 million debt offering to buy more Bitcoin, he’s not alone. Japan’s Metaplanet has increased its Bitcoin reserves for the fourth time, while Canadian-listed crypto firm and ETP provider, DeFi Technologies, just made Bitcoin its primary reserve asset. Interestingly, these moves all led to a rise in their stock prices. Even more recently, Abra, a crypto prime services and wealth management platform in the US, launched Abra Treasury, a service for corporates that want to hold crypto on their balance sheet as a reserve asset.  

It’s clear this trend has momentum, driven by the growing appetite for Bitcoin as a store of value and hedge against macro uncertainty, and especially as trust in fiat currencies wanes. Yet, many corporate treasures still remain cautious. So, what are these challenges exactly?

Accounting treatment – impairment loss  

One of the biggest issues in holding Bitcoin on the balance sheet is the risk of impairment loss. Bitcoin is currently classified as an intangible asset under U.S. GAAP (generally accepted accounting principles) and uses the “lower of cost or market” (LCM) method. This means companies must report a loss on their books if Bitcoin’s value drops below the purchase price, even if the company doesn’t sell. But if the price goes up, they cannot record any gains unless they sell, which can arguably lead to a balance sheet bias. 

The LCM method does indeed prevent a company from overstating the value of their inventory, but it can skew a company’s financial health by not reflecting Bitcoin’s true market value. This can put corporate treasurers at a disadvantage if Bitcoin’s price significantly declines at the end of a reporting period and then quickly recovers after, making reserves appear worse than they actually are. Bitcoin mining companies are especially vulnerable to this. 

MicroStrategy, Tesla and Meitu, among others, faced significant impairment losses throughout 2022 (with Tesla reducing its Bitcoin exposure by 75 percent in Q2). While these impairment charges may not affect cash flows directly, they have certainly undermined investor confidence in the past, causing noticeable drops in share prices. For smaller businesses, these charges can be even more severe, affecting fundraising efforts and competitive standing.  

Some jurisdictions have introduced fair value (FV) accounting for crypto assets, which means the assets are reported at their current market value. Although this method can introduce more fluctuations to the balance sheet, it does provide a more accurate representation of Bitcoin on the company’s financial statements. This is important for investors and stakeholders, and consequently a reason why many corporate treasurers remain cautious about Bitcoin until fair value treatment is adopted. At the end of the day, their role is to prudently safeguard a company’s reserves, so any financial misrepresentation should be avoided at all costs. Here’s a few other overlapping challenges to consider. 

  • Tax implications: For corporate treasurers, dealing with Bitcoin’s tax issues can be a complex task without the right expertise or jurisdiction. This requires frequent monitoring, revaluations, and without proper handling can lead to potential tax liabilities and administrative burdens.  
  • Crypto asset valuations: This price volatility also adds to the challenge of accurately determining a crypto asset’s market value. Again, without the right methods and tools in place, this may lead to discrepancies in financial statements.  
  • Regulatory uncertainty: This can lead to confusion among companies, conflicting reporting standards and complicated asset management and accounting processes, which could result in regulatory actions like the current scrutiny Coinbase faces. 

The good news is that new US guidelines have been drafted to address this challenge, while some jurisdictions, like Switzerland, have already adopted a more flexible approach (more below).

Working towards flexible accounting options 

At the end of 2023, the Financial Accounting Standards Board (FASB) in the U.S. released an update on its GAAP accounting guidelines, suggesting that companies will soon be able to recognise “fair value” changes in their crypto holdings. In practice, this means that when a company or corporate treasurer needs to report their financial, they can account for their Bitcoin reserves at the most recent market value – including any gains or recoveries after price dips.  

“Accounting for only the decreases, but not in the increases, in the value of crypto assets in the financial statements until they are sold does not provide relevant information that reflects 1) the underlying economics of those assets and 2) an entity’s financial position,” said stakeholders providing feedback to FASB on the existing guidance. 

FASB listened to this feedback and is working to finalise these accounting guidelines by the end of 2024. 

Interestingly, the Swiss Accounting Standards Board (FER) has a more flexible approach under the Swiss GAAP FER and the Swiss Code of Obligations (CO) for valuing crypto assets, emphasising the economic intent and true and fair view of the asset itself. In Switzerland, this means that Bitcoin can be classified as a financial asset, inventory or intangible asset based on its intended purpose, rather than being mandated as an intangible asset like in the U.S. This allows Bitcoin to be included in a company’s treasury reserves alongside other assets like cash and cash equivalents, using classification and valuation methods that genuinely reflect its intended use and market price (i.e. holding period, liquidity, financial strategy). 

Other jurisdictions like Singapore (SFRS) Japan (JICPA) are also somewhat flexible, allowing fair value assessment of crypto assets but under certain conditions, while others like Canada (CPA) and Germany (DRSC) follow a similar conservative approach to the U.S.  

The EU’s new crypto regulatory framework, MiCAR, is also expected to indirectly help corporate treasurers by providing a standardised framework that mandates crypto asset disclosure and valuation standards for companies across all EU member states. 

Concluding remarks 

Crypto guidelines are a complex subject, but adopting flexible classification and accounting standards could offer a better approach to managing crypto assets, especially if they’re recognised for their intended economic use rather than being forced into a box of uncertainty. Perhaps this could encourage companies to consider Bitcoin as a treasury reserve asset, not to mention its usage for other financial purposes. 

That being said, fair value accounting isn’t without its own set of challenges. Crypto assets are still highly volatile, and companies will need to invest time in understanding the technology, security implications as well as the right valuation methods that are fair and comply with their respective jurisdictional requirements. It will be interesting to see if the new US accounting guidelines accelerate the “Bitcoin treasury trend” and if other jurisdictions decide to follow suit.  

Either way, this hasn’t stopped many companies from including Bitcoin in their treasury strategies. Some see it as a way to diversify their treasury holdings – not because they think Bitcoin holds value better than assets like treasury bills, but to add another layer of financial security. Others are maybe taking a bolder strategy to improve the company’s image and positioning with potential investors – a strategy that could be supported by the rise in stock prices after these companies publicly announced their Bitcoin treasury purchases.


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