17.01.2021

Global Accounting Standards Body Argues

The Korea Times said in a report on Monday that according to the Korea Accounting Institute, the International Financial Reporting Interpretations Committee (IFRIC) made such decisions after a meeting in London in June.

Cryptocurrency holdings are neither cash nor financial assets, but meet the definition of an intangible asset, at least according to an influential global accounting standards body.

Indeed, the London-based IFRIC, which sets the International Financial Reporting Standard (IFRS), concluded in a little-noticed document dated June 21 that holdings of cryptocurrency meet the definition of an intangible asset, on the grounds that “(a) it is capable of being separated from the holder and sold or transferred individually; and (b) it does not give the holder a right to receive a fixed or determinable number of units of currency.”

Intangible assets are defined by the committee as non-monetary assets without physical substance. It has also concluded that cryptocurrency is not equity and does not give the holder contractual rights of exchange. Importantly, it said crypto is not cash because it is not, for practical purposes, a medium of exchange.

The Committee added that in some cases, cryptocurrency could be accounted for as inventory if an entity “hold cryptocurrencies for sale in the ordinary course of business.”

Stepping back, the treatment of cryptocurrency was not added to the committee’s standard-setting agenda, which means that the recent disclosure only reflects the thinking of the body and not an actual rule.

But once the committee sets a standard, it tends to be followed, as IFRS is used in about 144 jurisdictions and is required for public companies in Singapore, South Korea and almost all of Europe, though the U.S. has so far been only using the framework of the generally accepted accounting principles (GAAP).

Accounting treatment for cryptocurrency has been in discussion since about 2016, with numerous talks held and papers submitted. The IFRIC recently received 23 comment letters on the subject from a wide range of interested parties, including the Hong Kong Institute of Certified Public Accountants (HKICPA), The Indonesian Financial Accounting Standards Board, the Korea Accounting Standards Board (KASB) and the Accounting Standards Board of Japan (ASBJ).

Crypto Lender Celsius Taps Chainlink’s Price Oracles for Interest Rate ‘Decentralization’

Lending platform Celsius Network has teamed up with an oracle provider to make the price feeds it uses to calculate crypto asset interest rates less centralized.

Announced Monday, Celsius has subscribed to Chainlink, which connects smart contracts with real-world data, as a middle pathway to decentralization, said Chainlink CEO Serey Nazarov in a telephone interview with CoinDesk.

Celsius offers above-market interest rate returns for cryptocurrencies such as BTC and ETH, and has some $600 million in assets under management. Under the new arrangement, Chainlink will also place a portion of its bitcoin (BTC) and ethereum (ETH) crypto holdings under Celsius’ treasury management service.

Chainlink launched its live network in June 2019, having raised $32 million in a token sale in 2017. Chainlink provides pricing data for cryptocurrency applications through a series of smart contracts meshing on- and off-chain data into one price feed.

Decentralized finance (DeFi) applications have become a prime applicant for Chainlink in the last few months given the more robust nature of oracles over other pricing data solutions, the firm said. Polkadot became the first non-Ethereum blockchain to integrate Chainlink just a month ago.

Most technical or financial projects often see decentralization as an all or nothing effort, according to Nazarov. Chainlink adds one building block that projects can use to decentralize, in what he described as a “hybrid cloud blockchain application.”

“We’re allowing [Celsius] to make data inputs decentralized and what this can do is it can create a certain amount of guarantees we can show on-chain,” Nazarov said.

Describing the service, he explained: “Here’s the data that you were supposed to compute, here’s the number you would have computed if your computations were working correctly and then here’s the payment output you sent me.”

Chainlink joins other crypto-first entities such as the Litecoin Foundation in depositing funds for interest accrual. Nazarov said the deposits were “significant” portions of the treasury.

“Integrating Chainlink’s industry-leading decentralized oracle technology is the key step in the continued decentralization of Celsius [and] helps solidify our mission to bring revolutionary financial services to millions around the world,” said Celsius CEO Alex Mashinsky in a statement.

The partnership follows hectic weeks in the cryptocurrency lending markets which saw millions in collateral called in to solidify outstanding loans. Mashinsky called March 12, or “Black Thursday,” the “best day ever” for the firm after completing more loans than ever, while seeing interest rates skyrocket for some cryptocurrencies.

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