BNY Expands Its Crypto Operations
In a significant move reflecting the traditional finance sector’s shift towards blockchain technology and tokenized assets, BNY has launched a real-time reporting tool named Digital Assets Data Insights, in collaboration with Blackrock. This partnership between two major financial entities aims to create an on-chain valuation and reporting system that could significantly influence discussions around crypto accounting and reporting in the near future. Essentially, this tool will facilitate the direct posting of net asset value (NAV) data onto designated blockchains, eliminating the need for third-party accounting services. The initiative’s backing by BUIDL, an on-chain money market fund managed by Blackrock, underlines the increasing relevance of on-chain assets.
Linking Off-Chain Assets to Blockchain
A central feature of BNY’s initiative is the establishment of a connection between on-chain assets and off-chain data across various blockchain networks. By utilizing the data BNY already manages on-chain, the organization will be able to share specific accounting information on the Ethereum network, enhancing investors’ access to the traceability and transparency provided by public blockchains. The integration of smart contract capabilities will further enable customers to automate data analytics, merging off-chain data with public blockchain applications. Overall, BNY’s approach promises to improve transparency, traceability, and insights for tokenized products, regardless of whether they are secured on-chain or off-chain. This direct on-chain posting of tokenized funds could also spur discussions around accounting practices, reporting, and disclosures.
Improving Reporting Standards
A persistent challenge within the crypto and tokenized asset markets has been the inconsistency in reporting and disclosures. Despite various private sector proposals aimed at addressing this issue, significant gaps remain regarding critical accounting topics. These include the best methods for assessing valuation and liquidity for specific crypto assets and ensuring consistency in how this information is shared with the public. Accounting professionals must acknowledge how these non-CPA generated frameworks and best practices will shape client expectations moving forward. Access to more accurate and real-time data related to the valuation of crypto instruments will also facilitate the development of dashboards, key performance indicators (KPIs), credit scores, and other essential data for widely traded investment products and services. Furthermore, the increased availability of real-time data could positively impact the complex realm of crypto audits.
The Need for Crypto-Specific Audits
Despite the rapid growth of institutional adoption of crypto assets, standardized audit practices within the crypto landscape have not kept pace. The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have provided limited guidance so far, while tax authorities have adopted varying approaches to crypto taxation. Consequently, the responsibility for establishing standardized practices has largely fallen on the private sector. For instance, the American Institute of Certified Public Accountants (AICPA) has produced and updated several practice aids focused on accounting and attestation best practices for digital assets. Additionally, the Digital Chamber of Commerce has published multiple whitepapers on proof-of-reserves, which is an evolving concept expected to play a critical role in the future. BNY’s initiatives to promote real-time valuation and reporting will likely heighten interest in these practices as traditional finance continues to embrace crypto, signaling a potential transformation in the crypto accounting landscape.
