Accounting and back-office operations for web3 teams

Transcript

foreign [Music] hi everyone thanks so much for joining me today this afternoon okay so I just want to show our hands who is here is in charge of their teams or projects finances operations lead that's why you're here today so I just have arrived idea my audience okay so so or sometimes maybe you're the Project Lead I think okay so my name is Sharon and I mean I kind of kept it simple by just saying Phoenix Financial Ops and I'm from a company or I started one

called Headquarters short hq.xyz we basically specialize in I would say bookkeeping and Reconciliation uh because Finance Bank office we all know there's just so many things to do right there's payroll and Etc so for us actually I want to talk a lot more about the reporting and accounting space that is for today okay so yeah the usual legal disclaimer you know definitely engage your own Tax Advisor for your own projects okay we all know that no crypto is entering a new trying to be funny by news level of financial accountability um given you know what has happened last year you know Infamous headlines we all know and unfortunately I think good and bad but I think for all of us remaining

and building in a scene this year um you know regulatory scrutiny or maybe for some of you you know your private investors have perhaps asked you some questions related to more financial reporting um so the reason why I know I started headquarters is because back in Singapore in Singapore is definitely the hub for Asia's crypto scene I've been in that scene for a couple of years now and was right smacked at the center of a leading a Fiat on off ramp Network as well as a stable coin the Singapore currency in pretty much the peak of all the regulatory scrutiny as well so that's where I realized that you know a lot of the smaller teams or middle-sized teams are struggling definitely their expectations now that we have okay so I think for those that have raised your hands uh you know every day

your daily job is perhaps tasks related to hey at any point in time do you have accurate oversight around your team's treasury uh is it convenient enough though because you know no one has time so much time at least at the start you know to care or you know really go down to the details but yet you know you have to and the last three is really you know given the market climate these days all of us are having really big spotlights on us on all fronts whether it's secure um you know do you have best practices around your controls as well as compliance so this is a snapshot you know of a recent article that a16z just did it's not unique to crypto uh it's really just you know as a finance stack um what is it that you know many Finance

managers have to care so I thought you know we kind of had a very great summary um so I kind of snapshotted and put it here so you just go from the bottom to up we all know that no crypto is great for transactions there's softwares like or blog explorers like etherscan that really helps you know whether something is settled but here's the butt right this just knowing whether the transaction has settled it doesn't really give you any context in the business ledger sense right so that's where you know the job of anyone here who's in a finance role you always have to translate that into actual context another thing is especially for more of you if now given what's happening not everyone even in crypto has their treasury in pure digital assets I think Fiat is definitely making a strong

comeback um so that is also unfortunately now no longer One dashboard for Fiat as well right because I think a lot of portfolio trackers out there for camera so it's largely around just pure digital assets okay so again you know rising of many many different wallets have arised from your EOS all the way to you know different uh Mr stick and one custodial so depending on your nature as much I know sometimes we like to own our own keys for legal reasons perhaps on the jurisdictions you are at we are sometimes you know kind of soft forced to go down the track of custodians as well so how are you going to reconcile that when it's not all completely on chain yep and increasingly in later I will

give you a little bit of snapshot what's happening around the world the reason why we have many wallets is because we are really now being forced to segregate our user funds and our funds right so that the infamous co-mingling doesn't really happen okay so this is a quick snapshot um you know for anyone who is really day in jail for a special number of years who's responsible for accounting crypto this might be just a bit of a basic primer guide for you but for those who are new to this you know feel free to hit me up after this because these are some best basic things that you should be aware of right but one thing I've noticed about a lot of our users as well they tend to only think about all this at least a year after they have gone live but then

it's kind of I won't say it's too late but just that you'll be drowning in a mountain of transactions so it's one of those the earlier you start the better okay we all know for example uh I'll just pick one of them the challenges that we have primarily is everyone knows that crypto is still evolving um different D5 concepts are happening uh different types of nft models are happening or the obligations under nft is also changing so what that means is that the business activity is definitely never the same so that makes it very hard actually even for yourself or if you even engage an external bookkeeper it's pretty challenging on them as well okay so I'll just give a little bit of example so I think for most um you know if there's anyone here that you know

helps a project registered in the states you're probably susceptible to the get standards or otherwise for most of us outside of the states I think it's IFRS whether you're Euro more even Asia where I'm from we kind of fall under that standards so this is definitely not exhaustive but it's just a very quick guide um end of the business is actual you know we run a project even in let's say you know you're in the process of going down a dial track no matter what I think a lot of us we are running somewhat of a business so we do have to recognize what's the context of the transaction right and for that you know the recognition or in accounting speak accounting treatment most of the time is still treated as intangible assets

um some say you know even stable coins depending on your jurisdiction they will also treat it as that rather than cash as well okay okay so this is really going down to the details related to the accounting itself right so another day like what I said always go down to what exactly the transaction is for so let's be over just a snapshot of our platform uh just to get all of us uh as well so you can see that for example a transfer that's on chain right at the last point you know when you go to Ether scan it's one transaction hash but definitely when you look into it there's always bundle transactions that you need to account for so there's a challenges

um even though everything is on chain and transparent for you have you done things manually your accountant or bookkeeper will probably need to break it up manually right so they have to file two journal entries basically so the guest fees is one and the actual transaction as well okay the next one is actually once you actually identify the context so this is just a very quick you know feel free to take a photo if you want but you know these are just very common crypto transactions on the left how do you really categorize it so this is a very basic way of um categorizing it but this is you know highly encouraged usually if you're using a everyday accounting software like QuickBooks Online xero there's this thing called chart of accounts so treat

that as a source of Truth honestly from a data system perspective you know no point having two standards uh if you're already using that just use that standards and bring it in right and it's just about mapping it conveniently so maybe for some reason you know uh platform fee you know just tag it automatically to the chart of account of expense for example okay okay the next one call spaces so it's quite Infamous again no if done manually is very very tedious so also depends on the jurisdictions and what you decide to pick for example you'll notice that you know the last two lasting first I'll um highest in first cell this tool depends on jurisdiction for most places

for example is not encouraged right but whereas first in first cell and weighted average tends to be the norm that I've noticed in the industry so all these lights are actually public so feel free to take a snapshot and stuff okay lastly um I think when it comes to price data it's always you know when you come if one day should you be audited or maybe a bare minimum your own internal team wants to really know hey where do you get this market price from like exactly what is it right it's very simple I mean just make sure that you do keep track where all your prices are from uh even for example if you use either scan or like block a sport just dig around right just try to find out you know about how exactly do they have that price because you know years later should your project

succeed someone might come knocking on your door and it's just good to have those information on hand immediately right so that's one so data source second one is no maybe you know for example you always trade a token at a specific trading venue should you really take the market rate or should you just rely on that trading value where you always tend to take the prices from I think the latest obvious one so just be very mindful about exactly which price you're transacting it and reflect it as such okay so there's just me being a little bit cheeky so end of day you know we all know that everything when it comes to on-chain transactions are on chain is transparent whether it's for payments whether it's for loans whether it's for

other products as well that's the beauty right the transaction happens openly for everyone to see but unfortunately you know end of the day um whenever we end up having to report uh isn't just something that's on chain if the team is all Native you know in crypto that's great but I know sometimes the world hasn't caught up yet so we have to translate to something that they can actually prove they're nowhere responsible as well so the three financial statements essentially okay um so I'll just share a little bit of snapshot while I know um coming to before this week what's happening in the whole world right so the first B you know they have been having a very long report that they kind of published back in March so this is definitely the you know just the title headline go back you

know if you're on the road that really needs to know this you should read it it is important especially throughout the Gap um and yeah I think the big change you know that we've kind of noticed is that previously crypto is treated as an in definitely uh intangible asset now there's a bit more refinement around that I was saying it doesn't change drastically but it's a bit more refined now so for example you know it's about asking you to measure it at fair value which is a bit you know subjective sometimes so you have to also back it up okay over Asia um things kind of exciting very you just Google Japan Hong Kong Korea Singapore just it's very interesting but just in a month of mays and June a lot a lot of regulatory

um details came up call for proposals from the industry or propose regulations from the government itself has really all been released very funnily or coincidentally I would say in the past two months right so Asia I think definitely has a race amongst the regulations you know of how can we give clear regulations so that you know the cities can start attracting I think crypto projects in so that's kind of the trend that's happening in Asia if anyone is curious you know again just feel free to grab me later and talk so high level um Japan interestingly at least anecdotally what I've personally noticed is that the nft market has still been quite rampant there uh even largely not just the small creators but even the large Enterprise like Sega and stuff

um so then the government has been quite proactive to at least give Clarity to everyone in this segment um you can see that they have kind of tried a balance of being kind of not too stringent but yet you know being responsible right for example is if a token is not yet realized so if there's some sort of unrealized gains at the point of financial year you won't have Capital Tax yet second one however you know if you're nft Creator and you have sold nft now they definitely have classified it to be clearer that you have to charge uh consumption tanks so these are very clear things for the industry I would say big and small to grow next for South Korea um South Korea no unfortunately we all

know has been quite hit quite badly last year with all the uh Shenanigans and the D5 market so the government has definitely hit hard you know coming next year they are going to come out with a new user protection act that you know hasn't really quite been announced for the past few years okay and you know there's a lot of when it comes to centralized exchanges um very firm ask of separate segregation of customer funds and operational funds you actually see the similarity back in Singapore my hometown um where I know we have a couple of centralized exchanges uh registered in Singapore as well so again the ask is to have customer assets separated from operating funds sounds obvious but at least now it's on paper for everyone to

really follow explicitly okay um so yeah the paper has been uh all this has been published online these are really just basic points of what's Happening back home in Asia okay so to just give you an overview um definitely I'm not alone you know whatever I'm showing right now is uh it's a new age of tools right um to kind of just service this industry as we go through this kind of a stringent time you know uh where we have really been scrutinized quite strongly so it's quite crazy for someone who's building a D5 project here a protocol to also care about this in the back office in everything manually it's too much I would say for a team to handle so definitely the generations of tools that we have emerged where the goal is

typically to have one dashboard bring in all your wallets centralize or not working towards even Fiat to bring that in as well so they can help you have just one place to know your transactions but in a bookkeeping fashion not just a blockchain Leisure fashion okay so does the wallets are here it's very similar to portfolio trackers I would say but I think the main thing that differentiates us is the next step it's the how do we automate you know all your realized gains and loss based on the parameters that you give us of course you know a tool is not an accountant it's for you to set your parameters your standards and then we just run through it right yeah so that's what we do okay uh that's about it just feel free

to scan if you actually need any help on the back of his front um but otherwise I think we have some time so maybe you can just take a couple of questions no okay yeah okay just curious are you the The Logical buyer of this is a corporation or could it also be a dow good question um my observation is that corporations let's say you're a a normal consumer brand that sometimes you might have a bit of digital assets chances are the transactions are not as high so they probably would still get by with a manual system so it's actually more the letter when someone is a native crypto

project we have seen higher demands that interestingly I think those that haven't chosen to not go down that whole public token sale they actually do have a lot of private investors so the ask for management reporting has kind of emerged behind the scenes so it's definitely more crypto native projects yeah oh sorry what's your question yeah so yeah obviously this is going to be for crypto native projects yeah sorry but within this crypto native projects there are companies oh okay yes and you know corporations and then there are um you know there there are maker yeah okay like that those are those are not companies those are those are projects got it um definitely stronger Demand on

the first one yeah so those they have uh definitely onshore you know well nfg creators actually they're created onshore uh unlike the D5 community so that's a very clear uh segment under the dolls interestingly actually it's a mixed bag bouncing major there's a minor sum of them that they do have corporate entities to run the whole Dow Foundation system those yes as well yeah even though they are marketed as dogs yeah thank you for your presentation um so I have a question about the market data that you mentioned um so there is the part where you want to recognize the taxes and transactions but there's also the part where you want

to calculate the net asset values uh on your balance sheet so two questions there one what time of the day do you calculate those prices and second what prices what price sources have you seen to be recognized as serious by authorities to do those calculations okay good question the first one the norm that I've seen so as a system we actually do allow our teams to set it but I think the common setting that we have seen is uh day and closing yeah so that's what we have seen okay so let me just go back to that yeah so that's what that's what we have seen in terms of credible data sources um for Price field actually um they're hearing

I know it's generic for me to say this but it really depends on the client so if it's very clear that the client has been trading on a primary um trading venue they will ask for proof which actually gets down to the details if it comes from an actual auditor they will track all the transactions on that trading venue and the transector price yeah so thankfully I think it's better the Sexes whether it's dexes um they all have a trading price executed price so usually those that get audited tend to go down to that granularity otherwise usually for management reporting you know the common data aggregators like coin gecko coin Market that tends to be sufficient uh with a day include end of

day closing to be the most common one yeah but to go down all the way to the auditing stage usually there's a bit more detailed yeah yeah hi um Malisha here from streamflow we help teams with payroll actually real-time payroll and talk investing and I'm curious do you have some sort of integration or this is like full-blown project full full-blown product or you also offer some apis that we can integrate yeah good question apis is something upon request because we always realize that we asked you at a stage of not creating every endpoint yet so yeah but definitely that's fine to kind of uh post your question back um payments is

something that we have realized you know captures the context of the transaction whether there's an invoice or like you say token investing there's a context and that's needed for bookkeeping so for us you know the stands just be cheeky there's a reason why our company is called Headquarters because actually we believe in working with other payment providers basically like Stream flow to bring you guys in yeah all vice versa is fine yeah okay if there's no further questions uh that is it and thanks everyone for hearing listening to me [Applause]