GASB research on cryptocurrencies so far dug up much talk by states backed with little action, making standard-setting largely moot at this point, the board’s April 21, 2022, discussions signaled.
To date, no technical questions were submitted to the board – a gauge that signals an emerging issue needs to be addressed.
“There is one state that [plans] starting this summer to accept digital assets as payment for fees and for taxes, so I guess it’s something we’re looking at?” GASB Chair Joel Black said. “I’ve also seen some articles about coins that certain cities are marketing as digital coins…they seem to be a marketing tool in a way,” he said. “But I just don’t know if there are any accounting implications for that – but is that something we’ve looked at and seen as well?”
“There’s one city in particular that’s talked about it but nothing of significance has happened at this point,” Dean Mead, GASB assistant director of research and technical activities, responded. “It’s mostly talk at all levels and very little follow through at this point.”
“So we haven’t gotten any technical inquiries on any of this stuff at this point?” Black pressed.
“Not that I’m aware of.”
The discussion comes at a time when the buzz around use of cryptocurrencies has heightened globally, and standard setters, including the GASB, have heard from their advisory bodies they need to stay ahead of the topic.
“The time line from when we go from one government to X governments could be rapid, so I guess we’ll have to be as nimble as we can be to be able to recognize this may not happen in a slow steady state,” GASB Vice Chair Jeffrey Previdi said. “Once one government or a couple of governments start to accept it, then the gates are open and then other governments are going to pile on it,” he said.
In January, GASB staff began to monitor publications from state and local governments regarding the use of digital currency as methods of payments such as for tax payments, according to the discussions.
Although there are no states currently accepting digital currency as payment, 17 states enacted legislation or adopted resolutions regarding digital assets such as creating digital currency study committees or clarifying control of digital assets in their state regulations, the research found. One state is considering a bill that would amend the definition of legal tender to include digital currency as a means to pay taxes and debts; another state is considering a similar proposal that would allow digital currency payments of local sales and use taxes.
Regarding digital assets as investments, in 2021, a U.S. public employee pension fund invested in Bitcoin as a tool to manage risk, potentially becoming the first to place Bitcoin on its statement of fiduciary net position, staff research found. Before then other U.S. pension funds invested in digital currency to diversify funds rather than purchasing it directly.
General hesitancy about crypto stems from the volatility of the asset, a risk that governments might not be willing to take, the discussions indicated.
“Even if there’s somebody or a group of people with a platform that push for it, there is too much downside volatility to risk it,” GASB member Kristopher Knight said. “And maybe even if you could justify it right now where governments are in positions, at least state governments, to do gas tax holidays that we’re doing across the board and giving all of these revenues back to the community because we have significant surpluses based on where we are financially, we’re not going to be there forever and it just doesn’t make sense,” he said. “And so I think there has to be something else here that needs to be solved for before governments really take it on otherwise it’s just too volatile to accept.”
This article originally appeared in the April 22, 2022 edition of Accounting & Compliance Alert, available on Checkpoint.
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