The Federal Accounting Standards Advisory Board (FASAB) has provided clarification regarding the treatment of seized crypto assets and central bank digital currencies (CBDCs) in accounting standards. According to the federal authority, seized crypto assets should be classified as “nonmonetary property,” while CBDCs should be classified as “monetary instruments.” FASAB asserts that cryptocurrencies lack the essential characteristics of money, such as being an effective unit of account, medium of exchange, or store of value.
In a Technical Bulletin released on Friday, the FASAB outlined the accounting and reporting standards for seized and forfeited digital assets. As the body responsible for establishing accounting standards for the U.S. government, FASAB aims to provide clarity on this matter.
The bulletin specifically highlights that CBDCs are generally considered official digital forms of government-backed money that fulfill similar functions as physical cash. Therefore, reporting entities should treat CBDCs as monetary instruments, while all other digital assets, including cryptocurrencies, stablecoins, non-fungible tokens (NFTs), security tokens, and privacy coins, should be classified as nonmonetary property.
The bulletin explains that, apart from CBDCs, digital assets are not considered fiat money and lack the typical characteristics of money. It states that crypto assets are not effective as a medium of exchange due to the limited acceptance by entities as a form of payment. Additionally, crypto assets lack the strength and legitimacy associated with fiat money, which is backed by a sovereign nation’s institutions and legal system. Furthermore, their substantial market value volatility prevents them from serving as a stable store of value required for effective use as money.
The bulletin advises reporting entities to determine the market value of seized and forfeited digital assets by referring to publicly observable active markets specific to the digital asset in question. It also emphasizes that management should exercise judgment in selecting the most appropriate market for valuation purposes.
This clarification by the FASAB raises questions about the U.S. government’s accounting standards for seized crypto assets. What are your thoughts on treating these assets as nonmonetary property? Share your opinions in the comments section below.
