Notice - Accounting treatment for digital assets (2023-01-27)

Summary

This BMA notice clarifies how Digital Asset Businesses (DABs) must account for digital assets they store or maintain on behalf of customers, particularly those offering custodial wallet services. It interprets the Digital Asset Business Act 2018 definition of custodial wallet provider broadly and ties the treatment to the Digital Asset Business Accounts Rules 2021.

• Balance sheet presentation: Digital assets and corresponding liabilities held or maintained on behalf of customers must be presented on the DAB's statutory balance sheet and are subject to audit.
• Governance and control assertions: DABs must pay particular attention to Note 2 of Schedule II to the Rules covering governance, risk management and internal controls, including existence of reported digital assets, safekeeping and custody, and segregation of client assets.
• Valuation methods: DABs must also have regard to Note 3 of Schedule II to the Rules regarding valuation methods and active market definitions.

The clarification applies against the backdrop of the Digital Asset Business Accounts Rules 2021, which apply to financial years commencing on or after 31 December 2020. The notice does not set a new compliance deadline but affects how ongoing statutory financial returns should be prepared.

Key obligations

• DABs that store or maintain digital assets on behalf of customers must present the related assets and liabilities on their statutory balance sheet and have them subject to audit.
• DABs must address, in their statutory return disclosures under Note 2 of Schedule II to the Rules, the existence, safekeeping and custody, and segregation of customer digital assets.
• DABs must apply appropriate valuation methods and active market definitions per Note 3 of Schedule II to the Rules when reporting digital assets.

Applies to

Digital Asset Businesses (DABs), custodial wallet providers, digital asset exchanges, digital asset derivative exchanges