On January 23, 2025, in the Oval Office in Washington D.C., President Donald Trump signed an Executive Order titled “Strengthening U.S. Leadership in Digital Financial Technology.”
This Executive Order aims to support the development of digital assets and blockchain technology, positioning the United States as a central hub for crypto assets (virtual currencies). Specifically, it includes support for the growth of dollar-backed stablecoins and a prohibition on the introduction of a central bank digital currency (CBDC). Furthermore, President Trump has ordered the establishment of a “President’s Working Group on Digital Asset Markets” to formulate a federal regulatory framework for digital assets.
The signing of this Executive Order marks a significant turning point for the U.S. digital asset industry, and expectations among stakeholders are high that it will pave the way for future development and growth.
Prior to this Executive Order, significant changes to U.S. accounting standards for crypto assets have been applied for fiscal years beginning after December 15, 2024. Previously, U.S. GAAP (Generally Accepted Accounting Principles) lacked systematically organized, codified rules for the accounting treatment of crypto assets. Existing accounting standards were, in a sense, forcibly applied to this new asset class. However, as the practical use of digital assets expanded, there were increasing calls from various quarters to establish accounting standards that could appropriately address crypto assets.
In response to these calls, the Financial Accounting Standards Board (FASB), the standard-setting body, and the U.S. Securities and Exchange Commission (SEC) initiated a series of accounting standard revisions from 2023 to 2024, reforming digital asset practice and accounting into a simpler, more understandable form.
Accounting Standards Update (ASU) No. 2023-08, “Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets”
Previously, under U.S. GAAP, although explicit rules did not exist, crypto assets held by an entity were classified as intangible assets and subject to the following accounting treatment:
- Recognition at acquisition: Crypto assets are recognized at their acquisition cost.
- Impairment testing: At the end of each reporting period, if the fair value falls below the carrying amount, the difference is recognized as an impairment loss. Once recognized, this impairment loss is not reversed even if the fair value subsequently recovers.
The rationale behind this treatment was that crypto assets, being digital assets without physical form and differing from legal tender or financial instruments, were deemed appropriately classified as intangible assets. Consequently, the traditional accounting treatment for intangible assets was applied. However, it was pointed out that this method had a drawback: it could not reflect increases in the market value of crypto assets in the financial statements, making it difficult for investors and stakeholders to accurately assess a company’s financial position.
Revisions under the New Accounting Standard
In December 2023, the Financial Accounting Standards Board (FASB) issued new standards on the accounting and disclosure of crypto assets (ASU 2023-08, “Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets”). This new standard, while not changing the definition of crypto assets as intangible assets, defines them as non-monetary assets lacking physical form and introduces a new fair value measurement model in place of the impairment model. The main revisions are as follows:
- Fair value measurement: Applicable crypto assets will be measured at fair value at the end of each reporting period, with changes in fair value recognized in net income. This allows market value fluctuations of crypto assets to be directly reflected in the financial statements.
- Enhanced disclosure requirements: Companies are required to disclose in the notes to the financial statements information regarding the types of crypto assets held, quantities, fair values, acquisition costs, and changes in fair value.
This revision makes it possible to timely reflect not only the impact of price declines but also price increases of crypto assets in the financial statements, enabling users of the financial statements to understand a company’s financial position more accurately. The effective date for this new standard is for fiscal years beginning after December 15, 2024. However, companies may also choose early adoption.
Staff Accounting Bulletin No. 122 (SAB 122)
Crypto asset exchanges and custodians, such as financial institutions, are responsible for safeguarding and managing customers’ crypto assets. Traditionally, custodians managed customer assets off-balance sheet and generally did not recognize them on their own financial statements. However, Staff Accounting Bulletin No. 121 (SAB 121), issued by the SEC in 2022, required custodians to recognize customer crypto assets on their balance sheets as an asset (e.g., Crypto-Asset Safeguarding Asset) and a corresponding liability (e.g., Crypto-Asset Safeguarding Liability). These items were measured at the fair value of the crypto assets held in custody, with an equal amount recognized on both the asset and liability sides. This approach was used because custodians were deemed to have substantive control and responsibility for the customer’s crypto assets. However, this approach acted as a factual restriction on financial institutions’ entry into the crypto asset market, as holding crypto assets on their balance sheets would lower their regulatory capital ratios.
Revisions under the New Standard
Staff Accounting Bulletin No. 122 (SAB 122), issued in January 2025, rescinded the guidance in SAB 121. As a result, custodians are no longer obligated to recognize customer crypto assets on their own financial statements. Instead, custodians are required to measure and recognize a contingent loss if a risk of loss associated with their obligations arises, based on the same principles as other loss risks (e.g., lawsuit settlements or penalties for legal violations). They are still required to provide appropriate disclosures regarding the risks and obligations related to the protection of customer assets.
This revision is expected to reduce the financial statement burden on custodians and lower the barrier to entry into the crypto asset market. However, the responsibility for protecting customer assets remains critical, and appropriate risk management and disclosure are still required. This guidance is applied fully retrospectively for fiscal years beginning after December 15, 2024.
Conclusion
Thus, it can be said that the environment for these accounting standard revisions was already being steadily prepared before the Trump administration, serving as a policy backbone for the promotion of crypto assets. These accounting standard revisions aim to enhance transparency and consistency in the accounting treatment of crypto assets and to reflect a company’s financial position more accurately. Investors and stakeholders will be able to more appropriately assess a company’s financial soundness and risk profile by utilizing financial information based on these new standards. In the future, companies will be required to appropriately disclose information regarding their holding and management of crypto assets in accordance with these standards. This is expected to improve the reliability and stability of the crypto asset market.
Our firm provides support for U.S. listings, including Nasdaq, for Japanese companies. If this article has piqued your interest and you wish to learn more, please do not hesitate to contact us. We look forward to the opportunity to speak with you—those who are driving forward today with an eye toward the future—and to offer our support where we can be of assistance. For inquiries, please feel free to reach out to us using the contact form below.
