(The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Updates to add graphic.)

NEW YORK - There’s plenty of sound and fury surrounding cryptocurrencies like bitcoin. But does it signify anything America’s accounting standard-setters should worry about Reporting rules aren’t fit for purpose at corporate crypto-adopters like electric-car maker Tesla, payments firm Square, and software-and-bitcoin combo MicroStrategy. It’s a niche problem for now, but maybe not for long.

For companies that decide to own bitcoin, the digital currency is classified as a long-lived intangible asset, like a patent or trademark, by a process of bean-counting elimination. That means the balance-sheet value can only be marked down, never up, unless and until bitcoin is sold at a profit. That’s counterintuitive for what is essentially a speculative financial asset. Even so, the Financial Accounting Standards Board, which oversees such things, earlier this year decided not to put cryptocurrencies on its agenda just yet.

Meanwhile, the $100 billion Square, run by Twitter’s Jack Dorsey, also has a bitcoin problem with its income statement. The company lets customers buy bitcoin, which it first acquires for them. Square reports customer purchases as revenue and the crypto it buys for them as expenses. In the first quarter, Square’s bitcoin revenue was up 11-fold year-on-year to $3.5 billion, but the company’s take was only about 2% of that.

That’s different than how, for example, financial firms report revenue from customer stock trades on their platforms. Square used to publish a non-standard revenue metric that excluded bitcoin expenses, better reflecting its business. It stopped doing so after comments from the Securities and Exchange Commission in 2019. Now it steers people to gross profit, another measure that cancels out the bitcoin problem.

One reason FASB and other overseers can sit on their hands is that, for all the hype, it’s still a small-scale problem. Tesla, Square and MicroStrategy are the most prominent among very few publicly traded companies that own bitcoin. They all use the same accounting treatment, however counterintuitive, so there’s consistency.

Another argument for holding back is, conversely, that crypto accounting could become a very big problem. Different flavors of digital assets have different characteristics. A better treatment for bitcoin might not suit other cryptos. The task of creating a regime that works across the board is huge. Assuming digital currencies are here to stay, that’s a legitimate concern. But it’s also a reason to get cracking now before the stakes get even higher.

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Updates to add graphic.)

CONTEXT NEWS

- Square’s annual meeting of shareholders takes place on June 15.

- The payments group on May 6 reported first-quarter earnings. “Total net revenue was $5.06 billion in the first quarter of 2021, up 266% year-over-year,” the company said. “Excluding bitcoin, total net revenue in the first quarter was $1.55 billion, up 44% year over year.”

- After the third quarter of 2019, Square stopped providing investors with a non-standard measure called adjusted revenue, which excluded transaction costs and bitcoin expenses, following comments from the Securities and Exchange Commission. The company said at the time it considered the metric useful to measure performance and compare businesses in the payments sector.

- The Financial Accounting Standards Board earlier this year considered but decided against adding digital currencies to its standards-setting agenda. A FASB spokesperson said in a statement: "The FASB’s Invitation to Comment seeking stakeholder feedback on its future agenda will be published by the end of this month, and will give the FASB the opportunity to hear directly from stakeholders on areas of financial reporting they believe should be prioritized by the board."