TL;DR
-
Unfortunately for the crypto space today, corporations are heavily incentivized to avoid holding cryptocurrencies as assets, which means it’s largely not done.
-
However, those incentives are about to be rebalanced! As of next year, US companies holding cryptocurrency will be able to report their gains, as well as their losses.
-
This change could mean new money entering the crypto market by the billions.
Full Story
Get. This:
Back in the 1950’s, the median house cost $7,400, while the median price of a new car was $2,000.
And while it wasn’t as common as it is today, it wasn’t unheard of for households to own two or more cars.
Which meant in areas where property was more affordable, families would often spend more on their cars than they would their homes.
(Nuts!) But of course…
Over the following decades, property was reframed and accepted by many as a financial asset, incentivizing sustained investment which kept prices high.
So what’re we trying to get at here? It’s this:
What’s incentivized, is realized.
Unfortunately for the crypto space – corporations are heavily incentivized to avoid holding cryptocurrencies as assets, which means it’s largely not done.
See, right now, if a company buys (say) $10M worth of Bitcoin → its total value drops to $2M → then rockets up to $50M….
The company has to report that $50M worth of BTC, as being worth $2M.
This is because current tax rules say if a company holds a bag of Bitcoin (or any cryptocurrency) – it has to report a permanent loss every time BTC drops in price.
(Even if the company doesn’t ‘realize’ the loss, and sell the Bitcoin).
While on the flip side, if Bitcoin were to go up in price, that cannot be reported.
…which means for publicly traded companies, there’s absolutely no incentive to hold cryptocurrency.
“What, so we can only report our losses, and hurt our stock price in the process? Why would anyone opt-in to that??
You’d need to be insane.”
– Corporate Managers, probably.
The great news is: those incentives are about to be rebalanced!
As of next year, US companies holding cryptocurrency will be able to report their gains, as well as their losses.
Incentivizing any corporate treasury managers who are open to holding crypto on their balance sheet, to jump in!
(Which could mean new money entering the crypto market by the billions).
