The AICPA has
Designed generally to be less vulnerable to the notorious price swings that typify the crypto world, these tokens can be redeemed based on the method and timing established within the token issuer's terms, which may include the token issuer's terms of service, legal terms, user agreements and any other relevant documents maintained by the token issuer. In accordance with the token issuer's terms, the issuing entity is typically obligated to hold a sufficient amount of assets to cover the number of redeemable tokens outstanding.
The AICPA, though, noted there is currently no common framework for presenting whether there are sufficient assets for redemption, resulting in inconsistent and incomparable information regarding the nature and amount of redeemable tokens outstanding (such as the distributed ledger or blockchain that the tokens were issued on, or the smart contracts used to issue and manage the tokens) and the sufficiency of the redemption assets that back these tokens (such as which counterparties hold the assets that back the tokens, the nature of those arrangements, or information about the types of assets being held).
"When an issuer says, 'I want to create a token, and I want to sell these tokens,' there's [currently] no common set of criteria to consistently report on information that stakeholders will need about the ability to redeem them such as, how much cash is sitting in the bank, or the availability of that cash for token holders," said Diana Krupica, senior manager of emerging assurance technologies for assurance and advisory innovation at the AICPA. "[That's] the reason we're creating these criteria ... to have a common mechanism of saying, 'If you're going to issue a token, your stakeholders can expect you to follow these criteria and you will have to report on the amount and availability of cash for each token outstanding sitting there in the bank.'"
The framework concerns itself with the completeness and accuracy of three main things: the number of redeemable tokens outstanding; the redemption assets available for these tokens; and whether the latter is equal to or greater than the former.
On the first point, the number of redeemable tokens outstanding at a specific measurement point, issuers would disclose things like information affecting the reliability of the information obtained from the distributed ledgers or blockchain networks; the total natively minted token supply; and any material difference (for example, frozen, time-locked or permanently blacklisted tokens) from the amount of the redeemable tokens outstanding. In addition, disclosure is required about how redeemed tokens are processed in accordance with the token issuer's terms.
On the second point, the redemptive assets available for these tokens, the issuer discloses information such as the type of account in which the assets are held; the composition of those assets; and nature of the arrangements and rights to the assets, including any other claims, rights or assessments on the redemption assets.
On the third point, on the balance between outstanding tokens and available assets, issuers not only compare amounts but also disclose material incidents or events that may affect the amount of redeemable tokens outstanding or the redemption asset balance need to be completely and accurately disclosed.
These three factors are meant to reduce inconsistencies in disclosures of redeemable tokens outstanding and the sufficiency of the redemption assets for all stakeholders. The proposed framework, if approved, could be used to assist token issuers to disclose relevant information to stakeholders, or by a practitioner during an attestation engagement to evaluate management assertions surrounding the presentation of the redeemable tokens, redemption assets, and the comparison of the two.
The AICPA is currently seeking feedback for the proposal. Commenters are encouraged to download the exposure draft and send written comments to
