New Crypto Accounting Rules Set to Emerge From Unexpected Places

The regulatory headwinds that the US crypto industry has endured over the past few years may be subsiding. The tenure of Gary Gensler is ending at the SEC, a pro-crypto Congress is set to be sworn in, and the incoming administration has embraced Bitcoin and other crypto assets—all of which likely contributed to Bitcoin’s price surpassing the $100,000 mark this week.

The lack of specific accounting and auditing standards is one area that remains a potential obstacle toward broader cryptocurrency acceptance. The tax treatment of crypto transactions—with every one generating a tax reporting (and possibly liability) obligation—works against crypto assets achieving mainstream adoption.

But as the traditional finance sector continues to accelerate adoption of blockchain and other tokenized assets, practitioners and advisers should brace for accounting, tax, and reporting changes that might not originate strictly from typical government standard setters. CPAs and financial advisers need to watch the following two trends.

Non-FASB Standards

Much of the optimism around crypto and the trajectory of crypto prices relies on the expectation that the Trump administration will pass—possibly within the first 100 days in office—an executive order dictating the creation of a strategic Bitcoin reserve.

Doing so would turbocharge pressure on accounting and assurance professionals to develop robust reporting and assurance standards. The Financial Accounting Standards Board has issued only a single ASU addressing this issue, but crypto-specific or blockchain-specific auditing standards have yet to be created.

Several states are pushing ahead with new crypto-friendly regulations. Pennsylvania has proposed legislation to create a state-based Bitcoin reserve fund. An executive order would accelerate the need for faster accounting guidance to come to the market while offering flexibility for states such as Ohio, Colorado, and Wyoming that already accept Bitcoin transactions from taxpayers.

The reality that governments at the state and federal level are pursuing ways to push Bitcoin more into the mainstream will lead to calls for exemptions, carveouts, or other accounting-adjacent guidance to be included in the measures.

Tax practitioners should be educating themselves on the implications of this, and proactively discussing these issues with clients—specifically any tax ramifications of differences between the state and federal treatment of Bitcoin and other crypto assets.

Better Stablecoin Reporting

Stablecoins have, in the past, been labeled as a staid and somewhat uninspired corner of the crypto asset sector, but that has rapidly changed. Given the scale of the stablecoin space, and that the Treasury included 20 pages discussing stablecoins in a recent report, practitioners will need to monitor policy changes.

One of the biggest possible changes is that the Treasury could expand its existing tokenized operations. Given the (relative) small scale of approximately $2 billion, stablecoins and further integration of tokenized payments within the Treasury could serve as a major source of demand and a significant on-ramp for further stablecoin adoption. Such adoption, even if gradual, would in turn drive stablecoin policy conversations into a higher priority consideration.

Even as Tether, which issues Treasury stablecoins, contends with the lack of interest in any of the Big Four accounting and auditing firms taking on the audit project, the profitability of the business model is unquestioned—Tether’s earnings for 2024 total $7.7 billion. For context, BDO Italia, an independent member of BDO International Ltd., provides attestation services for Tether but hasn’t issued a complete audit report.

President-elect Donald Trump’s proposal of Howard Lutnick as Commerce Secretary also might drive accounting and financial reporting guidance from a non-traditional source. Lutnick is chairman and CEO of Cantor Fitzgerald LP, a Wall Street bank that has a pivotal role in the stablecoin space.

Since 2021, Cantor Fitzgerald has assisted Tether in managing the billions of US treasuries that serve as collateral for USDT, and the bank recently announced a Bitcoin financing business seeded with $2 billion of initial funding.

Having a powerful ally in Lutnick at the Cabinet level could assist Tether with ongoing probes being considered by the Treasury, would help position stablecoins as essential to the continued reserve status of the dollar, and facilitate legislative conversations as the stablecoin sector continues to grow. Increased legitimacy and more allies in policy circles could help create a better environment for crypto-specific reporting.

No matter who becomes Commerce Secretary, the importance and influence of stablecoins will put pressure on policymakers and governmental leaders to adjust reporting around these assets.

For example, the proof-of-reserves methodology, though not a catch-all solution for stablecoin reporting, should be embraced as a legitimate first step in better and more consistent reporting efforts. Building off that foundation and working with accounting standards would allow more productive conversations on how best to proceed as crypto continues to generate growing interest and profits.

The current accounting standard setting process hasn’t kept pace with market innovation. Efforts and initiatives at the state and federal level to enact pro-crypto policies will almost certainly lead to calls for improved crypto accounting and reporting standards.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Sean Stein Smith is an associate professor at Lehman College (CUNY), serves on the advisory board of the Wall Street Blockchain Alliance, and chairs its accounting working group.

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