The Financial Accounting Standards Board (FASB) continued its progress toward establishing final rules for digital assets by narrowing the scope of the project to cryptocurrencies, The Wall Street Journal and Accounting Today reported.

The FASB decided to exclude digital assets such as nonfungible tokens (NFTs) from consideration in its technical agenda to determine rule-making priorities at its meeting Wednesday. According to the Journal, FASB board member Susan Cosper defended excluding NFTs from the project. “It’s not pervasive or material at this juncture,” she said, referring to investments in NFTs. “It’s certainly something that we can focus on later if need be.”

The FASB agreed on several specific criteria that apply only to cryptocurrencies. They include the following: The asset must meet the GAAP definition of an intangible asset (which excludes financial assets); the asset must not provide the asset holder with enforceable rights to, or claims on, underlying goods, services or other assets (such as with a contract); the asset must have been created, or reside on, a distributed ledger or "blockchain;" the asset must be secured through cryptography; and the asset must be fungible.

The FASB began consideration of this project in May, according to the Wall Street Journal, in response to repeated requests from businesses, investors, accountants and lawmakers to set rules for the accounting of these assets. For years, the board declined to so do, reasoning that such investments were not prevalent enough to require new rule making. It acted now, according to the Journal, because “the matter had acquired more urgency as the market capitalization of Bitcoin and other crypto assets had shot up over time and more and more firms are investing in Bitcoin and Ethereum.”

The  FASB noted that the most frequently cited suggestion among commenters providing feedback to the board was to model the scope of the project after the definition of crypto assets included in an AICPA Digital Assets Practice Aid, Accounting for and Auditing Digital Assets, published earlier this year.

Now that the board has settled on the scope of its project, it may consider changing the project's name, too, to reflect the narrowed focus.

"I understand why we called this 'digital assets' up to this point because we didn't have a scope. We now have a scope … and our intent is to narrow the scope to crypto assets, a more common term that can be used to apply to the types of thing we're hoping to capture," board member Christine Botosan said, according to Accounting Today. “I think at this point in the process, we can agree that, now, we need to be more careful about the words we use. I would rename this project 'Accounting for Disclosure of Crypto Assets.'"

The FASB will now begin to work on the second part of the project, measurement, according to Accounting Today. Once that part is completed, the board will release a full exposure draft for public comment.