In the future, cryptocurrency issuing companies will no longer be able to arbitrarily recognize profits or assets.
The Securities and Futures Commission (SFC) under the Financial Services Commission (FSC) announced on Dec. 21 that it had passed the “Supervisory Guidelines for Accounting Treatment of Virtual Assets” in a regular meeting held the previous day. This supervisory guideline will be mandatory and applied from the business year starting on Jan. 1. The information regarding customer entrusted assets held by cryptocurrency exchanges will be introduced in line with the enforcement date of the “Virtual Asset Legislation,” which is scheduled for July 19.
According to the supervisory guideline, cryptocurrency issuing companies can recognize profits from cryptocurrency transfers only after fulfilling all obligations specified in the business plan. Previously, it was unclear whether companies could immediately recognize revenue by selling the issued cryptocurrency to customers and receiving monetary compensation.
Tokens reserved by cryptocurrency issuing companies, which are created but not transferred to others and kept internally, cannot be recognized as assets. If these reserved tokens are transferred to a third party, it could impact the value of circulating cryptocurrencies. As a result, disclosure of information such as the quantity of reserved tokens and future utilization plans is required in the comments section.
If a cryptocurrency exchange determines that it holds control over cryptocurrencies of customers, it must account for these assets and liabilities separately. The assessment of control should consider not only contractual arrangements between parties but also the comprehensive legal protection level of customers’ property rights. Key information such as the scale of cryptocurrency issuance, performance obligations, status of internal reserves and free distribution, details of customer entrusted asset contracts, and storage risks must be disclosed in the comments section.
The FSC stated “We will focus on scrutinizing actions by cryptocurrency businesses, such as excluding customer entrusted assets to evade regulations, which would otherwise be subject to external audits.”