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By Ali Qassim
National accounting authorities urged the international standard setter to issue global guidance for cryptocurrencies so they don’t need to individually, thereby avoiding a patchwork of inconsistent rules worldwide.
Canada’s chair of its Accounting Standards Board, Linda Mezon, told the Accounting Standards Advisory Forum in London April 16 that the continued absence of guidance from the International Accounting Standards Board could become a concern to the national authorities.
“Quite frankly given the activity level in Canada, if we don’t get anything here, we’ll have to step into the void. And, as you know we don’t like to do that,” Mezon told the advisory group during a discussion on the challenge cryptocurrencies and virtual currencies pose to accounting standards.
Referring to the hacking of Tokyo-based cryptocurrency exchange Coincheck Inc. early this year, Mezon pointed out that “from a reputational perspective, it would seem that if activity like this continues to grow and nothing is put in place, that is worrisome for us as standard setters.”
Kimberley Crook, chair of New Zealand Accounting Standards Board, said IASB should be listening to feedback and not “waiting ‘til we get a big problem before we start solving it.”
Andrew Watchman, the chair of the European Financial Reporting Advisory Group, said that the issue of cryptos wasn’t a priority for his private association’s members on “pure materiality grounds"—suggesting that the issue is too minor to influence investor decisions. But he said he could understand the call for more action “given the risks, the amount attention from regulators and the growing general level of interest” in cryptocurrencies.
Australian Accounting Standards Board Chair Kris Peach said that countries like Australia and India “are sitting and waiting.” Meanwhile in Korea, where 37 crypto exchanges are operating, authorities have given “some guidance if there is an active market stating that fair value accounting is appropriate.”
China has taken more drastic steps by banning both the use of cryptocurrencies and initial coin offerings (ICOs), Yu Chen, an official at the China Accounting Standards Committee, told the meeting.
Chen said the authorities are planning to introduce “more and more strict rules,” to which IASB Chairman Hans Hoogervorst joked, “how can you get more strict than forbidding” cryptos?
Chen acknowledged that despite the ban, a “small population of entities” in China hold cryptos and highlighted how the sector has developed “beyond our imagination” to achieve market capitalization of $600 billion in the end of 2017. “That’s 330 times bigger than in 2016,” Chen said.
“Although cryptocurrency is at a very early stage and the market is not mature, how to account for them is a problem,” Chen said, supporting the calls by Canada for more urgent action on issuing some preliminary guidance.
The Accounting Standards Board of Japan has taken its first steps to tackle crypto by issuing its “Practical Solution on the Accounting for Virtual Currencies under the Payment Services Act,” which the government amended in 2016 to introduce a registration system for virtual currency dealers, ASBJ Chairman Yasunobu Kawanishi told the meeting.
The new standard became effective April 1.
Under the standard, virtual currencies with an active market should be measured at their market price, with any changes in that price being recognized in profit or loss. Those without an active market should be measured at cost, he said.
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