Crypto brings transparency, but crypto reporting needs to be obtained

Bitcoin

BTC
and other cryptocurrencies may have started the conversation around the concept of blockchain and crypto for business, but over the last few years, the number of organizations that have adopted these technologies has increased rapidly as more cryptocurrencies were created. Banking institutions, payment processors, credit card companies, insurance companies, logistics and transport companies, medical practices, colleges and universities and almost every other type of company in the world have tried to implement blockchain and / or crypto asset solutions.

Along with this increased integration, the crypto-asset landscape has also continued to expand and grow far beyond simple bitcoin-related price speculation. Stablecoins, which is a leader in organizational implementation and use of a wide range of organizations – including household names such as PayPal

PYPL
MasterCard

MINE
, and Visa – is just one example of the diversification of this sector. Decentralized finance (DeFi), non-fungible tokens (NFTs), decentralized autonomous organizations (DAOs) and the emergence of central bank digital currencies (CBDCs) complete this diverse landscape.

One aspect of this space that has not been followed, however, is how organizations are supposed to report information related to blockchain or cryptocurrencies. Let’s take a look at some areas where crypto reporting can – and should – be improved.

Reports on accounts. A seemingly simple question that continues to pose a serious obstacle for organizations and policy makers is, where exactly should cryptocurrencies be reported in an organization’s accounts? Since crypto does not fit nicely into any existing asset class or classification, this has left the question open for interpretation by market participants. This lack of consistency is exacerbated by the fact that so far no final guidance has been issued in the case setting accounting standards.

A logical step forward, and one that increasingly seems to be being considered by both the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB), is to try to clarify what cryptography is from a financial point of view. statement. Codifying, or at least beginning to define, where crypto belongs in accounting would be helpful to investors, regulators, and other market participants.

Footnote report. Knowledgeable users of accounts, regardless of their jurisdiction, will almost all agree that footnotes to accounts are a rich source of information. Selection of accounting policies, explanations of financial statements numbers and specific information on how financial statements are composed are just a few of the topics presented and discussed in the footnotes. Why should information about blockchain and cryptocurrencies be treated differently?

For example, should blockchain protocol information be made public so that investors and other market participants can review it? What about the specifics of using the wallet and third-party security practices? With the wave of hot wallet-related hacks, this is not an abstract or inactive concern for organizations looking to leverage crypto at the enterprise level. Finally, what type of data – and how much of that information – should be disclosed and reported as they are directly related to cryptocurrencies owned and used in the organization? Crypto-assets are all different and must be accounted for, reported and documented accurately.

Method of publication. Reflecting the demand and appetite for financial and non-financial information, investors and regulators rightly want access to the most accurate, relevant and up-to-date information possible. While organizations are struggling to modernize and keep up with these traditional financial data requirements, not to mention the amount of environmental, social and administrative (ESG) data requirements, crypto should not be pushed into the background.

Given the volatility surrounding the cryptocurrency area – both in terms of the prices of certain instruments and the uncertain and ambiguous regulatory outlook – it makes sense that the frequency of reporting this information should be more than once a quarter or a year. Press releases, social media postings and other informal methods of communication can be tempting, useful and used by many organizations, but will not be sufficient in the future.

Establishing consistency and clarity in how often and in what format organizations should publish information on crypto operations is without a doubt the most important part of this process.

Cryptoadoption and integration continue to accelerate and spread in almost every aspect of the economy, but in order to recognize the benefits of this adoption, greater clarity and consistency is needed. This need for improved reporting and disclosure affects all aspects of how the organization uses crypto, as well as how the results of this operation are communicated to interested third party groups. Consistency, transparency and objectivity are the hallmarks of any effective method of communication; Communication about cryptography should not be an exception to this rule.

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