Category: Blog Row 1 (Resource)

Industry Overcomes Significant Hurdle in Obtaining Crypto Accounting Standards

by Chamber

Industry Overcomes Significant Hurdle in Obtaining Crypto Accounting Standards

January 24, 2022
  • The Financial Accounting Standards Board finds crypto accounting standards are the top priority among stakeholders.
  • The lack of authoritative guidance on accounting for digital assets is one of the biggest barriers to adoption.
  • FASB to set its agenda in the coming months and the stage is set to finally get crypto accounting standards.

We need crypto accounting standards now!” Chamber founder and president, Perianne Boring on Mornings with Maria

The Financial Accounting Standards Board (FASB), which sets accounting standards for private and public U.S. companies, has not developed any accounting standards for digital assets. This has proved to be one of the biggest barriers to the adoption of digital assets.  

FASB solicited an “agenda request” in September inviting comments from the public on identifying ‘pervasive needs’ to improve generally accepted accounting principles (GAAP), and inquiring about potential areas for future accounting standards setting. 

The Chamber of Digital Commerce has been advocating FASB since 2015 on the need for accounting standards for digital assets. Previously, FASB has pushed back due to perceived lack of ‘pervasiveness’ of digital assets, and therefore did not allocate the resources necessary to develop authoritative guidance on accounting for crypto. 

The Chamber of Digital Commerce led a significant response to FASB’s most recent agenda, providing input from the Chamber’s more than 200 members, as well as insights from Congressional leadership and other industry stakeholders. Our intention was to both educate FASB and its advisory staff on the pervasive impacts of digital assets, as well as to make a strong case for FASB to now undertake standards setting for digital assets.

If you are wondering what adoption looks like, over 52 million Americans already own cryptocurrencies today. It’s estimated that over 27% of millennials own some form of crypto. We are seeing more and more investors look to digital assets as a hedge against inflation. A survey from Fidelity Digital Assets found that seven in ten institutional investors from around the world, including advisors, family offices, pensions, hedge funds, and endowments, plan to buy or invest in digital assets within the next five years. Deloitte’s 2021 Global Blockchain Survey found that 76% of respondents believe that digital assets will either serve as a strong alternative to fiat currencies or outright replace fiat within the next 5 to 10 years.

Through the comment process, FASB received a significant response of 522 comment letters. Of these 522 responses, 445 (85% of the respondents) commented solely and exclusively on accounting standards for digital assets, providing feedback on the pervasive impact of digital assets and the need to prioritize standards setting. More than 50% of the respondents indicated that standard setting for digital assets should be considered as the highest priority for FASB. 

The chart above provides an illustration of the areas that respondents identified as top priority, in order of most frequently identified to least frequently identified. The staff notes that these metrics include those respondents that stated that these areas should be the Board’s top priority in response to Question 2 of the consultation.  

The above chart provides a visual representation of the respondents’ overall views on the top and low priority areas side by side, in order of most frequently identified to least frequently identified.

The Board will consider the impact of this feedback in upcoming meetings in setting scope and priorities in standard setting.

“We sometimes accelerate projects, particularly when there’s significant investor interest in an emerging issue,” FASB Chair Richard Jones said.

Accordingly, the Chamber of Digital Commerce will continue to work with FASB to assure this crucial standard setting is on the agenda and prioritized accordingly.

Learn more here. 

JOIN THE CAMPAIGN

#CryptoAccountingStandardsNow!

Chamber Summary: Capitol Hill’s First-Ever Proof-of-Work Mining Hearing

by Chamber

Chamber Summary: Capitol Hill’s First-Ever Proof-of-Work Mining Hearing on the Energy & Commerce Oversight Subcommittee

January 20, 2022

On January 20th, 2022 the Energy and Commerce Oversight Subcommittee held the first-ever hearing on Capitol Hill to focus solely on Proof of Work mining.  Witnesses for the hearing included; Ari Juels Weill Family Foundation and Joan and Sanford I. Weill Professor Jacobs Technion-Cornell Institute Cornell Tech, John Belizair Chief Executive Officer Soluna Computing, Inc., Brian Brooks Chief Executive Officer BitFury, Steve Wright Former Chief Executive Officer Chelan County Public Utility District and Bonneville Power Administration, and Gregory Zerzan Shareholder Jordan Ramis P.C.

Following the Chinese government ban of cryptocurrency mining, the United States is now the global leader in hash rate. This is an opportunity for the U.S. to assert leadership on several fronts: securing the Bitcoin network, expanding economic growth via digital asset adoption, and perhaps most important, an unprecedented opportunity to deploy green energy infrastructure that enables a clean energy transition.  

The bitcoin mining industry today is spurring U.S. economic growth, job creation, and innovation, especially in rural areas where opportunity and innovation are needed most. This is being achieved while also creating financial incentives for the buildout of renewable energy infrastructure.

Yet these opportunities are sometimes lost in the policy debates with misinformation.  While digital asset mining currently uses less than 0.1% of the world’s energy,  headlines claim,  “Bitcoin Uses More Energy than Many Countries,” or “Bitcoin Mining Makes Senaca Lake Feel Like a Hot Tub.”

The reality is Proof of Work mining, while sometimes being energy intensive, can also be far more flexible with its energy needs, particularly so compared to other energy intensive industries, such as data centers and manufacturing facilities. Key to an abundant, clean energy future, and Chamber of Digital Commerce’s Proof of Work mining industry members are committed to using carbon neutral or renewable resources across the industry and partnering with utilities on growing renewable energy.  

The hearing on January 20th offered the Proof of Work industry an opportunity to engage policymakers and share the innovations that are spurring green energy alternatives, while discussing policy frameworks to further encourage a clean energy transition for the digital asset  ecosystem.   

Congress should take this opportunity to lay the groundwork and chart a cooperative path forward through coordination with the Proof of Work mining industry, as well as the utility industry. Proof of Work miners are unique energy buyers that are extremely agile, highly flexible, and easily interruptible.  These “energy buyers of last resort” are a driver of renewable development by creating green energy demand, while providing base-load stability to the grid.

One example of how the industry can benefit the population as a whole is the unique ability to power down, known as “curtailment,” during peak usage for rate-payers.  Bitcoin mining can provide a utility with a reliable base load customer that can provide a stable consistent demand to justify build out of clean energy infrastructure.  Further, on the rare occasions when customer demand spikes (e.g. during extreme weather events that create heating or cooling peaks) and unlike data centers, cloud service providers and manufacturing facilities, bitcoin miners can work cooperatively with utilities to cut off their power demands for the benefit of the grid in mere minutes with no adverse effects.  Proof of Work miners power down to allow critical usage of power at community assets like hospitals and municipal government, or cooling and heating during weather extremes.  No other industry that uses the amount of energy as proof of work mining has the capacity to do this.

Bitcoin has been adopted by over 100 million individuals worldwide over its short lifetime and mining is the foundation of this ecosystem, creating an opportunity for millions of people in less fortunate economic circumstances and the unbanked.  Cryptocurrency represents a major breakthrough by offering workers and savers a way to protect themselves from inflation and provide access to the financial system by storing their wealth in a medium that is independent of banks, fees, and long-standing inequities in our banking system. 

The Chamber and its members appreciate the Energy and Commerce Oversight Subcommittee’s leadership to initiate an open and honest dialogue regarding Proof of Work mining, and we look forward to working with the committee and other stakeholders on this foundational issue that is important to the entire crypto economy.

¹ https://www.nytimes.com/interactive/2021/09/03/climate/bitcoin-carbon-footprint-electricity.html

Analysis: House Financial Services Hearing

by Chamber

Analysis: House Financial Services Hearing

December 10, 2021

The House Financial Services Committee, “Digital Assets and the Future of Finance: Understanding the Challenges and Benefits of Financial Innovation in the United States,” held on December 8 2021, surprised some in the industry by not featuring the indignation and skepticism many expected. Instead, CEO’s from 6 companies, including Chamber members Circle, FTX, Paxos, and Stellar, were greeted with curiosity, informed questions, and even some encouragement. If you missed the hearing, a replay is available here.

The Chamber has been focused on educating our legislators for numerous years. And prior to Wednesday’s hearing, we invested significant, dedicated time over the past several weeks meeting with HFSC Committee members and their staffs to better understand their immediate concerns, address them, and educate them more broadly on the fast-evolving innovations in the digital asset marketplace.  The lack of fireworks and considered questions posed at Wednesday’s hearing is a testament to all our efforts. It is a sign of progress that we are together building greater understanding of these financial innovations and engaging constructively to shape digital asset policy and regulatory clarity.  Rep. Patrick McHenry (R-NC) noted, “This technology is new and exciting. It promises a new direction for financial economies, services, and products.” 

Both the level of Committee Member participation, and the extended length of the question-and-answer period, indicate that in both content and demeanor, the collaboration our industry is undertaking – and the willingness of policymakers to understand the many facets of cryptocurrencies and blockchain technologies – is taking hold. 

This hearing also reinforced that there is much more work to be done both in Congress and among regulators to bring about the needed regulatory clarity for digital assets and blockchain.  In his opening statement, Ranking Member Patrick McHenry (R-NC) stated “As with any fast-growing industry, there are questions that should be answered, but this industry is already regulated.  I do not think that many in Congress know enough about this technology to have a real debate on these issues.  The goal today is to listen, learn, and ask questions.  We need to ensure that the crypto revolution happens in the U.S. and is not pushed overseas.  We need smart rules of the road, not kneejerk regulatory reactions.  We must avoid overregulation.  We should create a regulatory framework that encourages innovation instead of stifles it.  This industry should not be dictated by unclear public statements and regulation by enforcement.  We should dispel the notion that digital assets are a major threat to financial stability or are used primarily for nefarious behavior.”

We heard agreement from both sides of the aisle that digital assets are regulated today at both the state and federal level, but that the predominant federal approach of “regulation by enforcement” at both the SEC and the CFTC was undesirable. As Rep. Jake Auchincloss (D-MA) noted, the approach “is not fair, it’s not efficient or conducive to U.S.-based innovation. Congress needs to provide clarity and predictability by statute.”  Rep. Van Taylor (R-TX) posed a question to all of the witnesses, asking, “Everyone here has multiple licenses in multiple states.  Is this working and effective? In my briefing notes I was surprised to read that crypto is considered to be an unregulated industry. Do you feel unregulated?”

CEO of FTX Samuel Bankman-Fried said that, despite many implications, large exchanges such as FTX are already heavily regulated and licensed, both through state money transmitter licenses and registration with the CFTC to trade derivatives.  He said that he supports fully transparent disclosures and the sharing of market data, ensuring that all participants in crypto markets are on a level playing field. 

Getting these policies right is important for several reasons. As both Reps. Gregory Meeks (D-NY) and Ritchie Torres (D-NY) noted during the hearing, digital assets and blockchain offer great promise for financial inclusion and economic opportunity for the unbanked and under-banked. With the appropriate regulatory framework, greater access for consumers to financial services and faster payments for small businesses, for example, can grow. “I think a component of digital asset markets is this concept of democratizing access to financial markets,” stated Circle CEO Jeremy Allaire. “Digital asset markets do that. There is more democratized access, there are fewer barriers of entry to individuals. I think that affects the adoption rates of minority communities.” 

Related to that, it was also good to see policymakers making distinctions between the varieties of digital assets, particularly stablecoins, which the Chamber highlighted as being crucial to enabling greater financial inclusion in our letter to the President’s Working Group on Financial Markets last month, and within our consultation response to the Bank of International Settlements Committee on Payments and Market Infrastructures (“CPMI”) and the International Organization of Securities Commissions (“IOSCO”). As Stellar Development CEO Denelle Dixon stated, “With near-instant settlement flows and an accelerated collection of funds, consumers, some of whom may have been limited to using cash for various payments. … Their transactions are traceable on the network, safer and more secure than transacting in cash. It provides consumers with options for improved efficiency, reduced risk, and strong competitive pricing pressure.” 

Not only was it encouraging to see policymakers display a greater level of understanding of the evolving technologies, such as Web3, but also the crucial role crypto and blockchain can play for U.S. economic competitiveness and security.  With seeming growing bipartisan consensus that it is important establish clarity within the crypto policy framework for innovators and investors alike, there is also the realization that such policies can ensure that the U.S. dollar remains the competitive currency for stablecoins globally and that the U.S. remains a preferred base of operations for crypto and blockchain innovators.    

Crypto, and its role within ransomware, has increasingly been under the microscope of law enforcement and regulators. Over the past several months, the Chamber has been proactively conducting ransomware briefings to reinforce the importance of adequate cyber-security to prevent ransomware attacks, but once they’ve occurred, the crypto industry should be seen as an investigative partner to trace, track and recover payment demands, as well as discourage future attacks.  We were encouraged to see that our message is getting through when Rep. William Timmons (R-SC) asked, “I am concerned about the increasing growth of ransomware attacks and would like to better understand crypto’s role within this. I understand that the crypto industry believes it can and currently does play an important role in preventing illicit finance, including ransomware. Could you describe for us how your firms play an active role, when these ransomware attacks occur? I’d like to better understand the role centralized exchanges play within the flow of funds. And what tools can Congress put in your toolbox through legislation to help you?”

The overall tenor of the hearing was bi-partisan and pragmatic – dare we say positive? Several members of the Committee indicated that they were working on bills to streamline crypto regulation and support the industry, and the Chamber will continue to be proactive in our engagement with Congress to support feedback and our members subject matter expertise as these bills are drafted.

Our team is enthusiastic about the positive engagement and interest from our Congressional leaders. We believe that DC engagement in the crypto industry has reached a turning point and we expect interest in this space to further increase. We will continue to work with our members to advocate for public policies that benefit our membership.

ADDITIONAL RESOURCES

Majority Hearing Memo

Minority Hearing Memo

Paul Kiernan (8 Dec 2021), “Crypto Executives Defend Industry as Congress Considers” The Wall Street Journal.

Nikhilesh De (8 Dec 2021), “LIVE BLOG: House Meets on Crypto Regulation.”

Pete Schroeder, et al. (8 Dec 2021), “Crypto executives urge light touch as Congress mulls new regulation.”

Kevin T. Dugan (8 Dec 2021), “Crypto Gets its Day with Congress.” New York Magazine.

Statement on President’s Working Group Report on Stablecoins

by Chamber

Statement from the Chamber of Digital Commerce on the release of the President’s Working Group (PWG) on Financial Markets “Report on Stablecoins”

November 1, 2021

“We are pleased to see that The President’s Working Group (PWG) report notes the important role stablecoins can play in faster, more efficient and resilient payment systems, and the need for a transparent and open process in developing policies for these emerging innovations, which is a reflection of the position we have held at the Chamber for many years.

The Chamber recently submitted to members of the PWG a letter detailing our recommendations for the regulatory treatment of stablecoins, including our view that stablecoins do not pose systemic risk to the financial system and are not securities.

That said, the Chamber has concerns regarding some of the report’s recommendations, such as prioritizing the Securities and Exchange Commission’s role over payments products, allowing multiple agencies to assert regulatory jurisdiction over stablecoins without specifying each agency’s role, and prescriptive Financial Stability Oversight Council (FSOC) policies, including considering designating certain activities as systemically important. Such actions could chill payments innovation during a crucial time when the United States should be encouraging innovation and adoption, and asserting leadership in the global digital asset marketplace.

The Chamber believes in the importance of a collaborative, bottom-up approach to setting a policy framework. In particular, the Chamber believes that this process should include input from the many state regulatory bodies that have first-hand experience in shaping successful policies for stablecoins. We appreciate the PWG’s engagement on this issue, and we look forward to engaging with the Biden Administration and policymakers in encouraging greater understanding of the stablecoin ecosystem and shaping policies that will serve consumers, investors and innovators well.”

Chamber of Digital Commerce Submits Open Letter to President’s Working Group on Stablecoins

by Chamber

Chamber of Digital Commerce Submits Open Letter to President’s Working Group on Stablecoins

October 19, 2021

Stablecoins Do Not Pose Systemic Risk to the Financial System and are Not Securities

In recent weeks the President’s Working Group on Financial Markets has been developing regulatory recommendations for stablecoin payments systems. In an effort to contribute to the policy dialogue, the Chamber of Digital Commerce, the world’s leading blockchain and digital asset trade association, today submitted to members of the President’s Working Group a letter detailing our recommendations for the regulatory treatment of stablecoins. The letter was also sent to all members of the Financial Stability Oversight Council.

“Stablecoins are already fulfilling their promise of transforming today’s payments systems by enabling efficient, low-cost payments and increasing access to the financial system,” said Chamber of Digital Commerce founder and president Perianne Boring. “As the President’s Working Group considers a regulatory framework for digital assets – and specifically stablecoins – a balanced policy approach that encourages innovation and maintains U.S. global leadership in the digital asset and blockchain ecosystem is crucial.”

The Chamber believes the current federal and state regulatory regimes should remain in place. This will allow U.S.-headquartered, U.S. dollar-pegged stablecoin payments systems to be regulated in the same way that other U.S. digital payments platforms are regulated. These stablecoin payments systems, like other retail-focused payments systems, do not currently pose a systemic risk to the U.S. financial system.

The Chamber, however, also sees opportunities to enhance the U.S. regulatory approach for stablecoins via a policy framework that is principles-based and flexible, which would allow for new and innovative payments system structures to grow, while appropriately addressing potential risks. Such policies include: 

  • Streamlining state-level regulatory approaches in a way that follows the lead of states that allow certain stablecoin payments systems to obtain state-level special purpose charters.
  • Ensuring federal agencies provide clarity that most stablecoins are retail-focused digital payments instruments, not investment products. 
  • Simplifying tax treatment for stablecoin transactions. 
  • And, at the federal level, creating an optional special-purpose charter for stablecoin payments systems that meet certain regulatory requirements.

“It is important for policymakers and consumers alike to understand that stablecoin payments systems offer opportunities for increased access to lower cost payments and financial services for everyone, but especially those who are currently underserved”, said Chamber chief policy officer Teana Baker-Taylor. “A policy framework that sets clear rules of the road, and is flexible enough to encourage ongoing payments innovation, is imperative to ensure the certainly needed by the digital asset industry to continue to build more efficient and effective payments systems.

To achieve these important goals, the Chamber urges policymakers to put in place an appropriate policy framework for stablecoins to attain their full potential. This policy framework is not just important to the digital asset and blockchain industry. It is important for the U.S. to maintain its leadership position in the global innovation economy. The Chamber hopes its comments help achieve these worthy goals.

Asia-Pacific’s Increasing Demand for Food Traceability

by Chamber

Asia-Pacific’s Increasing Demand for Food Traceability

By: Ken Kodama

June 23, 2021

 

Rising Demand for Product Traceability in Asia

By 2030, Asia’s population is projected to be 250 million people larger and 65% of the world’s middle-class population will reside in Asia-Pacific. 

These consumers will increasingly become more interested in the products they are purchasing, and seek more details about their food supply chains to ensure they are buying products that they can trust.

As seen in the West, more and more consumers are tech-savvy these days and want access to highly nutritious, fresh, and safe produce that is delivered conveniently and on demand. Consumers have expressed a willingness to pay a premium for trusted food sources, especially during a global pandemic.

However, the agri-food industry is struggling to keep up with increased consumer demand.

The ongoing global pandemic coupled with rapidly growing populations and urbanization, has led to high levels of waste and an inferior quality of end products due to inefficient supply chains. 

Other factors such as climate change and environmental degradation have only added to the struggles of the agri-food industry.

As it stands today, Asia-Pacific is a major component in the current global food chain, accounting for 19% of total global food and agriculture exports, and 31% of total food and agriculture imports. 

According to a report published by Allied Market Research, the global food traceability market is expected to grow to $22.27 billion by 2025, from $10.96 billion in 2017, registering a CAGR of 9.3% from 2018 to 2025.  

Asia-Pacific is estimated to be one of the largest growth rates with a CAGR of 14.9% from 2018 to 2025, owing to growth in industries such as fresh produce & seeds, fisheries, and meat & livestock along with expansion of leading players in China, India, and other emerging economies. 

This has intensified the urgency of enterprises and large organizations in the region to vastly implement upgraded technological solutions such as those utilizing blockchain technology to create a more transparent and cohesive supply chain traceability and provide a more trusted product to their consumers. 

As many enterprises in the region still utilize outdated paper-based methods of data management, blockchain technology now offers a faster, simpler, safer, and more economical way of storing data.

 

Blockchain Delivers a Product-Market Fit

Overall, there has been a significant growth in the blockchain market in the Asia-Pacific region due to two main reasons. 

First, there has been steadily increasing government support for blockchain solutions innovation to make regional economies more competitive and geared for the 4th Industrial Revolution.

Second, this support has in turn increased the formation of regional blockchain solutions companies to solve a variety of problems in different economic sectors. 

This drive can be seen in countries like Singapore, Hong Kong, and China taking a strong interest in promoting blockchain-based ecosystems to solve complex industrial problems. 

While individual countries have differed on their stance towards digital assets, they have expressed favorable views towards helping the private sector develop valuable services to tackle these complex problems, as seen through their forward-looking policies and provision of needed regulatory certainty.

Blockchain provides the ideal product fit for the growing market demand in Asia-Pacific for food products and trusted food sources, as governments are supporting their private sectors to utilize blockchain technology to solve problems such as in the case of the agri-food industry.

 

EMURGO Trace and its Benefits for Product Traceability

As a global emerging technologies company and a founding entity of the Cardano blockchain protocol based in Singapore, EMURGO’s Trace Solution aims to solve the complex problems of agri-food companies through the benefit of blockchain solutions.

EMURGO Trace gives enterprises a completely new, secure, and efficient digital way to tell their consumers and stakeholders the true story behind their food products while being tailored to their needs. 

This unique value proposition generated through a digital blockchain-based solution offers increased end consumer confidence, data recording efficiency, data transparency, and increased sales margins, which is a win-win for all enterprises and their consumers.

The integration of a blockchain traceability solution enables enterprises to solve the problems of increasing consumer demand, lack of quality transparency, and rising business costs.

 

The Future of Blockchain Expansion in Asian Industries and Organizations

Despite the global pandemic, the Singapore Blockchain Innovation Program (SBIP) was launched in December 2020 with the objective of strengthening the blockchain ecosystem and facilitating the development, commercialization, and adoption of blockchain technology in Singapore with an initial capital of $12 million. 

China on the other hand, is also looking to seize the opportunities presented by blockchain. Earlier this month, the government of the Chinese province of Yunnan has set out a plan to support local blockchain development. One example includes providing state subsidies to startups in the space for rent and talent recruitment.

It is clear that Asia has demonstrated a consistent approach towards implementing blockchain across various local industries. It is a frontrunner in the digital revolution, bringing smart cities, decentralized data, and futuristic payment methods to the mainstream public. We are just at the beginning of the blockchain decade, and EMURGO is very excited to see the digital revolution take place in Asia and across the world as our industry continues to develop.

 

Ken Kodama is CEO of EMURGO – a global emerging technologies company, providing custom-built solutions to solve some of the most complex problems of the most complex organizations, and is a founding entity of the Cardano protocol. EMURGO has offices in Singapore, India, and Indonesia, and a roster of global clients & partners.

When it Comes to Accounting Standards for Digital Assets, the Devil is in the Details, says Microstrategy’s Michael Saylor

by Chamber

When it Comes to Accounting Standards for Digital Assets, the Devil is in the Details, says Microstrategy’s Michael Saylor

June 18, 2021

Even as the market capitalization for digital assets has exploded to more than $2 trillion and the number of publicly-traded companies looking into carrying bitcoin on their balance sheets continues to increase, the accounting rules and standards have not kept pace, resulting in confusion, complexity, and reluctance among corporations to adopt digital currencies on a large scale. 

The task of establishing these so-called Generally Accepted Accounting Principles or GAAP standards in the U.S. falls to the Financial Accounting Standards Board (FASB), an independent, private non-profit. All publicly-traded companies in the U.S. are required to follow these GAAP standards when filing their financial statements. Standards for publicly traded companies outside the U.S. are called the International Accounting Standards (IAS). Those are set by the IFRS Foundation and International Standards Accounting Board (IASB) and have been adopted by more than 120 countries including in the European Union. 

Arcane as they may seem, both FASB and IFRS are two crucial organizations for publicly traded corporations in the U.S. and abroad that have or are looking to add digital assets to their balance sheets. But that’s easier said than done, as evidenced in recent comments by Microstrategy Founder and CEO, Michael Saylor, who delved into some of the reasons why current FASB standards are so troublesome for companies such as Microstrategy. Saylor was speaking at a Parallel event on June 17th hosted by the Chamber of Digital Commerce. His comments on FASB were part of a wide-ranging conversation with Brian Estes, the CIO and Managing Partner at Off the Chain Capital. 

Since 2017, the Chamber has been engaged in working with both FASB and IASB to develop an appropriate accounting treatment for digital assets. You can read more about our efforts at the links below.

Crypto Accounting Standards Now!

Chamber FASB Blog

Chamber FASB Letter 

Chamber IFRS Letter

Statement On Bipartisan Financial Innovation Caucus Launch

by Chamber

The Chamber of Digital Commerce is pleased to support the launch of the Financial Innovation Caucus. Wyoming and Arizona have been trailblazers in FinTech innovation and we are encouraged to see this leadership continue in the Senate in a bipartisan fashion under Senators Lummis and Sinema. The Chamber has called for U.S. competitiveness and leadership in DLT and digital assets in its National Action Plan for Blockchain and we are confident that the Caucus will continue the drumbeat in the Senate.

Your Firm’s Success Depends On An Effective Data Quality Model

by Chamber

Your Firm’s Success Depends On An Effective Data Quality Model

A guest blog from Chamber Member PeerNova
June 7, 2021

To learn more about this important topic, be sure to download our Data Quality White Paper.

The success of a business relies on its data quality. Data must be correct, consistent, complete, and timely for it to be useful and fit-for-purpose. However, achieving high-quality data has been a significant challenge within today’s financial firms. Low-quality data can quickly trickle down the pipeline, causing a variety of issues for firms of all sizes. For example, a single low quality datum can result in business leaders making uninformed decisions and submitting inaccurate regulatory reports. This can lead to missed opportunities, client dissatisfaction, and heavy regulatory fines. Firms must also use additional resources to fix any errors or resolve exceptions, increasing their overall operational costs. It becomes critical that businesses implement an effective data quality tool or data quality platform to meet their goals, and ultimately, succeed.

What is a Data Quality Tool?

A data quality tool identifies, parses, and corrects flawed data to support effective information governance and data management. It applies rules and automates manual processes to ensure that firms have high-quality data throughout their organization. High-quality data that is ingested or integrated into the firm’s systems still undergoes various transformations that could compromise its quality. Therefore, catching any inaccuracies is vital at all touchpoints of a business. Data quality tools typically address four core areas:

    1. Data cleansing
    2. Data integration
    3. Master data management
    4. Metadata management

Data quality tools create rules to correct data that streamline processes, reduce operational costs, and improve the accuracy of downstream analytics and insights. Modern solutions can now also provide data mapping, consolidation; ESL (extract, transform, load); and more. Additionally, reconciliation functions are also performed by most of today’s data quality tools.

 

What are the Challenges with Today’s Data Quality Platforms? 

Ensuring end-to-end (E2E) data quality across the firm is laborious and costly, due to the inherent complexity of business processes and the heterogeneous nature of IT applications.  Many data quality platforms on the market have significant limitations due to their static nature. These solutions often perform data quality checks as a last step in the pipeline, instead of perpetually checking the data throughout the data’s lifecycle. Additionally, most are batch-oriented and bilateral, which means that to perform data quality checks on entire business flows, multiple bilateral checks must occur. As a result, firms must increase their operational resources to hire teams to manually fix errors and unify siloed systems, applications, and workflows.

 

What Benefits Can an Effective Data Quality Tool Provide?

There are a variety of benefits that firms can experience by implementing an effective data quality tool. 

Better Decision-Making and More Opportunities
Firms have continuous, high-quality data, resulting in more accurate analytics, clearer insights, and accurate data-driven decisions. Institutions can then monetize their data for direct top-line growth.

Reduced Risk and Regulatory Fines
Firms can be confident in the data they are submitting to regulators, reducing their regulatory risk and avoiding hefty fines. 

Increased Operational Efficiency and Reduced Costs
Firms no longer have to manually comb through and verify large volumes of data manually. They can use fewer resources, and avoid false or duplicate investigations. 

 

What is the Ideal Data Quality Platform?

The ideal data quality solution provides the following:

Continuous, E2E Data Quality
An effective solution provides continuous data quality by performing data quality checks and applying data quality rules across siloed systems, applications, and workflows. Additionally, the tool should automate the process of acquiring data, connecting datasets, running data quality checks, generating relevant reports, and fixing errors in real-time.

 

Faster Exception Management and Root-Cause Analysis
Using an effective data quality tool, firms can perform faster exception management and root-cause analysis to manage, prioritize, and resolve errors as they occur. This also reduces resolution times for data quality, SLAs, and timeliness metrics, ultimately leading to better operational efficiency and faster time to market.

 

Zero-Code Automation
With a zero-code platform, business users can easily create, reconfigure, and implement a variety of applications and workflows themselves through a self-serve graphical user interface (GUI).

 

Enterprise-Scalability
It is vital that the tool achieves continuous data quality at scale, through stream-based execution and auto-scaling to handle any volume spikes. By implementing an effective data quality tool, firms increase their operational efficiency, reduce risk, and make better decisions. At its core, the PeerNova Cuneiform Platform is a zero-code platform that provides continuous data quality and simplifies exception resolution across internal and external data sources. For more information, please visit peernova.com or contact us. 

Treasury Adopts Chamber Proposals into Tax Compliance Agenda

by Chamber

Information reporting guidance is critical to enabling taxpayers to comply with their tax obligations, and we support the Treasury Department in finally considering this much needed guidance. For too long the cryptocurrency industry has been cast as failing its tax compliance obligations. However, a lack of guidance has hindered tax professionals and taxpayers from meeting those expectations. In its American Families Plan Tax Compliance Agenda published today, the Treasury Department proposes coverage of foreign financial institutions and cryptoasset exchanges and custodians in its plan to close the tax gap by increasing information reporting. This is welcome news.

Last year, the Chamber of Digital Commerce urged the Treasury Department and the IRS to release much needed information reporting guidance to support just this. Last week, we proactively identified for the IRS and Treasury a Tax Policy Framework where clarity and guidance must be provided this year for cryptoasset transactions, including information reporting. Anticipating that the IRS is considering the application of the Foreign Account Tax Compliance Act (FATCA) to cryptoassets held offshore, we also provided detailed input to ensure better outcomes for the industry. We look forward to working with the IRS and Treasury on their proposals in an advanced notice of proposed rulemaking – which would enable time for industry input before finalizing a rule in this complex space.

We are concerned, however, with how cryptocurrency is characterized in the Compliance Agenda. The Treasury Department asserts cryptocurrency possesses a “significant detection problem by facilitating illegal activity broadly including tax evasion” and cites to a report from 2013 – a year before the IRS released taxpayer guidance for cryptocurrency – to support its claim. Not only does this negative characterization harm the reputation of an industry that supports compliance efforts and law enforcement objectives, but it relies on outdated information from almost a decade ago to back up its statement. As we said in our Framework, “published tax guidance relating to digital asset transactions has not kept pace” with the significant growth of these markets. “This disparity creates risk for taxpayers seeking to comply, wastes IRS audit resources, dampens commercial activity and economic recovery, and stifles U.S. innovation,” noting that the IRS has not released meaningful guidance since Notice 2014-21, published seven years ago. The GAO also noted that the IRS suffers from a significant lack of data to support an understanding of the extent of any underreporting, and information reporting is designed to do just that.

The Chamber has maintained a proactive focus on cryptoasset-related tax policy issues and welcomes the opportunity to serve as a continued resource for the Treasury and IRS.