The Federal Accounting Standards Advisory Board (FASAB) has provided clarification on how seized crypto assets and central bank digital currencies (CBDCs) should be treated from an accounting perspective. FASAB, which is responsible for establishing accounting standards for the U.S. government, published a Technical Bulletin (TB) to outline the appropriate standards for reporting and accounting of seized and forfeited digital assets.
According to FASAB, CBDCs are considered official forms of government-backed digital money that serve similar purposes to physical cash. As such, they should be treated as monetary instruments. On the other hand, all other digital assets, including cryptocurrencies, stablecoins, non-fungible tokens (NFTs), security tokens, and privacy coins, should be treated as nonmonetary property.
The bulletin explains that digital assets, except for CBDCs, lack the necessary characteristics to be considered fiat money. They are not effective as a unit of account, medium of exchange, or store of value. Cryptocurrencies, in particular, are not widely accepted as a form of payment, and they lack the backing and legitimacy provided by a sovereign nation's institutions and legal system. Additionally, their significant market value volatility makes them an unstable store of value.
The bulletin advises reporting entities to determine the market value of seized and forfeited digital assets by using a publicly observable active market for the specific asset. It also highlights the importance of management's judgment in selecting the most appropriate market for valuation.
The U.S. government's decision to treat seized crypto assets as nonmonetary property aligns with the unique characteristics of cryptocurrencies and their limited functionality as a form of money. This clarification provides a standardized approach to accounting for these assets and ensures consistency in financial reporting across government entities.