Crypto Catching On, Owners Cashing In

2024 is shaping up as the year of crypto. The trends are unmistakable — and largely positive — for the revolutionary currency.
Consider the highlights from just the past five months:
- In January, the Securities & Exchange Commission (SEC) approved funds that include spot Bitcoin exchange-traded funds (ETFs). Getting the SEC stamp of approval took 15 years: Bitcoin launched in 2009 selling for just pennies before soaring to a top value of $73K-plus this past March.
- The SEC then sent shockwaves through the investing world when it approved sales of Ethereum, the most popular ether crypto, in mid-May. Now other nations are racing to market-approve their own cryptocurrencies.
- President Biden is “eager” to lighter regulation of cryptocurrency as a commodity, not a security. Former president Donald Trump is no longer calling Bitcoin a scam. And many in Congress, on both sides of the aisle, like the idea of placing crypto outside of the SEC’s purview.
- Current and future cryptocurrencies remain at risk of crashing to zero. The next wave of scam artists like Sam Bankman-Fried are on the horizon. SEC chairman Gary Gensler is warning investors — including companies that are now buying shares — to be vigilant.
Crypto ‘Stall’ by the SEC is Over — Now What?
When the SEC approved Bitcoin on January 10, Forbes asked, “Is this a genuine shift in [the SEC’s] attitude towards crypto assets, or is it merely a strategic move favoring traditional financial institutions?” The jury’s still out on that matter.
The SEC’s Gensler opposes the House of Representatives seeking to exclude crypto from securities regulation. The Republican-sponsored Financial Innovation and Technology for the 21st Century Act (FIT 21), which passed by a bipartisan 279-136 vote, calls for designating crypto assets as commodities under the oversight of the Commodities and Futures Trading Commission.
Gensler warned of more “frauds and scams” if the SEC doesn’t regulate crypto. ”[T]his is a field where some of the leading lights in the field are either now in jail, or awaiting jail or extradition,” Gensler told attendees at an Investment Company Institute event. “[The SEC would] never let a traditional exchange trade against their customers and be an active market maker.”
FIT 21 may not be voted on in the Senate this year, but could pass in the next term if the Senate majority swings to the Republicans. Biden or Trump are likely to sign the bill.
Too Much Money for Government to Stay On Sideline
Shares of Bitcoin began selling on exchanges in January. Since then, well over $50 billion has poured in from investors. Black Rock is getting even richer with the world’s largest bitcoin fund in the market.
Many Bitcoin owners who bought in very low and rode the wild ups and downs are loathe to sell. Buying and holding is the most common strategy for Bitcoin owners. The crypto’s creators set a 20 million limit and only 6% of Bitcoin is left to be “mined.” Investing in ETFs is the only affordable option for most investors looking to catch up.
Until very recently, “no political party would come out aggressively for the crypto industry,” says crypto expert BowTied Bull. “This is because it wasn’t big enough to move the voting block and a large number of people had lost their life savings investing in various scams. What changed? Simple really. Price. If Bitcoin was at $8,000, Ethereum was at $800 and Solana at $10, we can pretty much guarantee no one would care about crypto.”
The SEC isn’t the only regulatory body putting out the welcome mat for cryptocurrencies. The United Kingdom’s Financial Conduct Authority approved Bitcoin and Ethereum-based exchange-traded products on May 22. Both are set to be traded on the London Stock Exchange, though only by professional or institutional traders.
El Salvador and the Central African Republic are the only countries that accept Bitcoin as legal tender for now. Paraguay, Saint Kitts and Nevis, and Honduras are considering bills to follow suit.
Companies Need to Check Crypto Accounting Standard
Publicly traded companies that own crypto will need to account for the currency soon. Crypto such as Bitcoin will need to be broken out separately from other intangible assets on balance sheets and income statements once a Financial Accounting Standards Board (FASB) revised standard goes into effect.
For annual and interim reporting periods, FASB will require companies to report the name, cost basis, fair value and number of units for significant assets. The reporting requirements go into effect after December 14, barring any further revisions.
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