SEC advised ICOs to keep books

Wesley Bricker, SEC Chief Accountant advised ICOs to maintain financial records
13 September 2017   554

The Chief Accountant of the Securities and Exchange Commission (SEC), Wesley Bricker, warned ICO companies participating of the need to maintain financial records and disclose in it all the necessary details. This is reported by CoinDesk.

This statement was made by the SEC representative during a speech at the AICPA National Conference on Banking and Savings Institutions on September 11 in Washington. In his speech, Bricker touched on various areas of finance, raising also issues of financial reporting that should be taken into account by the organizers of the ICO.

For issuers, questions included:

  • Are there liabilities requiring recognition or disclosure?
  • Are there implications for the provision for income taxes?
  • Are there previously recognized assets that require de-recognition?
  • Are there revenues or expenses requiring recognition or deferral?
  • Is there a transaction with owners, resulting in debt or equity classification and possibly compensation expense?
  • What are the necessary financial statement filing requirements?

An entity involved in initial coin or token offering activities will need to consider the necessary accounting, disclosure and reporting guidance based on the nature of its involvement.
 

Wesley Bricker
Chief Accountant, SEC

Likewise, he advised investors and token owners to ask:

  • Does specialized accounting guidance (such as for investment companies) apply to the holder’s financial statement presentation?
  • What are the characteristics of the coin or token in considering whether, how, and at what value, the transaction should affect the holder's financial statements?
  • What is the nature of the holder's involvement in considering whether the issuer's activities should be consolidated or accounted for under the equity method?

Finally, Briker noted that all these questions are typical. Only the specifics of the specific ICO will determine which reporting requirements are to be met.

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German Financial Regulator Clarifies Stance on ICOs

The Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) has clarified its position on ICOs
22 February 2018   53

German financial regulator admitted it was receiving many inquiries about the status of tokens and cryptocurrencies. According to an advisory letter, BaFin provides some basic definitions of ICOs and related terms. It is important because the results of a new survey showed that more than two-thirds of Germans know about bitcoin.

In this letter, BaFin educates the public and explains how tokens are typically generated, how blockchain works and that ICOs are used to raise funds for startup projects. The note states that for regulatory purposes, ICOs, tokens, coins, and cryptocurrencies are subject to the existing provisions in the field of securities supervision and other relevant national and EU laws.

The authority advises participants in ICOs to check and follow rules applicable to regulated financial instruments, such as securities. If businesses or individuals have any doubts about regulations, they should approach BaFin.

According to BaFin, companies should fulfill any obligations under the Banking Act and the Capital Investment Code, the Insurance Supervision Act and the Payment Services Supervision Act. The transactions may be prohibited if relevant regulatory requirements are not met.

The authority also states that legal classification of tokens requires precise examination. It will determine their status on a case-by-case basis after studying their features. The token should be transferable and tradable on cryptocurrency trading platforms in order to be classified as a security.