Bitcoin has found a safe place for itself on corporate balance sheets in recent quarters. While retail adoption is growing at a faster pace lately, institutional investors are catching up and lagging behind.
Unsurprisingly, Bitcoin data Treasuries highlighted that the majority of publicly traded companies that own Bitcoin are companies specializing in cryptocurrency or blockchain companies. For starters, Michael Saylor’s MicroStrategy alone holds about 92,000 Bitcoins. The balance sheets of other companies including Square Inc., Coinbase, Galaxy Digital also have substantial currencies.
However, with non-crypto-market companies such as Tesla and Nexon Co. Ltd. entering the cryptoactive space, the trend seems to be gradually changing.
While the difference isn’t colossal, first-quarter numbers indicate that Bitcoin retail flow has exceeded institutional flow. However, in the last quarter of 2020, institutions had an advantage when compared to their peers.
The FASB, the SEC-recognized nonprofit that sets accounting standards, has not issued any definitive guidance for accounting for digital and crypto assets specifically, and that, according to Congressman Tom Emmer, is a problem. Entities often list their interests as intangibles and this subsequently impacts the balance sheet because they have to almost “underestimate” the asset they are trying to account for. Further elaborating the same in a recent podcast, he stated,
“Yes, you can underestimate and at least for the moment, it gives them a tax benefit, but the risk is great for me.”
As described above, the number of entities that own Bitcoin have been making successive V-shaped recoveries since March. As of this writing, the same number was about to hit the 27,500 mark. Meanwhile, the offer held by entities with 0.01 BTC to 0.1 BTC continued to grow without any hindrance.
However, if the rules are clearer, the trend of companies buying Bitcoin would continue according to Emmer, which, in turn, would encourage more individuals and entities to get involved in the space. He added,
“While it might be a benefit today, it could actually be a detriment in the future and I really think they need to clean that up from an accounting perspective so that people who are engaged in this industry aren’t surprised later. ”