BNY Expands Its Crypto Operations
In a significant development reflecting the shift of traditional financial institutions towards blockchain technology, BNY has launched a new real-time reporting tool known as Digital Assets Data Insights, in collaboration with BlackRock. This partnership marks a pivotal moment for both companies and is poised to greatly influence the dialogue surrounding crypto accounting and reporting practices. Essentially, the tool will facilitate the direct posting of net asset value (NAV) data onto specific blockchains, eliminating the need for intermediary accounting services. The inclusion of BlackRock’s on-chain money market fund, BUIDL, underscores the increasing relevance of on-chain assets in the financial ecosystem. The advantages associated with this initiative are multifaceted: BNY can post NAV figures directly on the blockchain, improve the credibility of tokenized funds through greater transparency and real-time updates, and enable other financial products to benefit from a more robust set of tools tailored for tokenized data. Additionally, this partnership highlights the emerging trend of tokenized assets and data beyond traditional cryptocurrencies like Bitcoin and Ethereum. Although still in its infancy, this real-time reporting capability could significantly enhance the development of tradeable products and services.
Bridging Off-Chain Assets with Public Blockchains
One of the pivotal components of BNY’s strategy is to create a bridge between on-chain assets and off-chain data across various blockchain platforms. By utilizing the on-chain data already managed by BNY, the institution aims to relay specific accounting information to the Ethereum network. This integration will empower investors to harness the traceability and transparency of public blockchains. Furthermore, by incorporating smart contract capabilities, clients will have the opportunity to automate data analytics and seamlessly combine off-chain data with the functionalities offered by public blockchains. In essence, BNY’s initiatives could enhance transparency, traceability, and insights for tokenized products, regardless of whether these assets are housed on-chain or secured through off-chain methods. The direct posting of tokenized fund values onto the blockchain could further stimulate discussions surrounding accounting, reporting, and disclosure practices.
Addressing Reporting Challenges in Crypto
A persistent challenge within the crypto and tokenized asset sector is the absence of standardized reporting and disclosure measures across the market. Despite various private sector proposals, significant gaps remain regarding essential accounting issues. This includes determining the best methods for assessing valuation and liquidity for specific crypto assets, products, or instruments, as well as ensuring consistent reporting of this information to the market. Accounting professionals must remain cognizant of how these non-CPA-developed reporting frameworks and best practices will shape client expectations in the future. Improved access to real-time data linked to the valuation of crypto instruments will foster the growth of dashboards, key performance indicators (KPIs), credit ratings, and other essential data that underpin widely traded investment products and services. Additionally, the introduction of more real-time data is likely to impact the complex area of crypto audits.
The Need for Crypto-Specific Audit Standards
The crypto asset landscape has notably lagged in developing standardized audit practices, even as institutional adoption of cryptocurrencies continues to rise. With limited guidance issued thus far by the FASB and IASB, and tax authorities taking diverse approaches to crypto taxation, the responsibility for establishing such practices has predominantly fallen on the private sector. For instance, the AICPA has created and updated several practice aids related to accounting and attestation best practices for digital assets. Additionally, the Digital Chamber of Commerce has published several whitepapers on proof-of-reserves, an evolving practice expected to play a crucial role in the future. BNY’s efforts to facilitate real-time valuation and reporting will likely heighten interest in these audit practices. As traditional finance increasingly embraces cryptocurrencies, major institutions are poised to transform the crypto accounting landscape.
