How corporate accountants are grappling with companies holding cryptocurrencies on their balance sheets, as official GAAP guidelines don't exist
A company holding such digital assets can — for the most part — only write down their value. It's unfair. Just look at those risky startup investments. Tweets: @matt_hougan Tweets: Matt Hougan / @matt_hougan : Ridiculous accounting standards can have significant impacts and can take a long time to change. https://www.bloomberg.com/...
Context & Ripple Effects
This piece sits at the start of a three-year arc in crypto accounting. In mid-2021, holders of bitcoin faced the impairment problem directly — as [[a:967403|companies with bitcoin on their balance sheets recorded write-downs whenever its price fell]], with no symmetric way to mark value back up. Matt Hougan's complaint is that this one-way treatment has real consequences and changes slowly.
What came after sharpened the stakes: after FTX's collapse auditors began tagging crypto clients as "high risk", stretching audits and fees, the SEC demanded explicit disclosure of crypto exposure from US public companies, and its chief accountant warned audit firms they could be liable for client misstatements. The absence of GAAP guidance that Bloomberg flagged became the fault line every later development ran through.
First-order effects
- Corporate treasurers holding crypto must book impairments on any price decline but cannot reverse them on recoveries, so earnings understate asset value whenever prices rise again — an asymmetry Hougan argues is 'unfair' compared to how risky startup equity investments are treated.
Second-order effects
- Auditors and the SEC have filled the guidance vacuum themselves: firms now charge more or drop crypto clients as high-risk, and regulators lean on disclosure requirements rather than measurement rules to protect investors.
Third-order effects
- Until standard-setters issue formal crypto accounting rules, each market cycle forces ad hoc judgment calls by accountants, auditors, and the SEC — meaning reported balance sheets for digital assets stay less comparable than those for any other asset class of similar scale.
The trend: Crypto is being forced through the legitimacy gap between informal market practice and formal accounting standards, with regulators patching the hole via disclosure and auditor liability instead of measurement rules.