Crypto Capital Race 2.0

September 18, 2018 • By

TL, DR: Companies are looking for additional access to capital markets. Will we see a rise in reverse merger activity? When considering investments, read the disclosures or consult someone who does. Consider the speed at which a company is going to market, if taking shortcuts, are the elements in place for sustainability?

TL, PNR (prefer not to read): Watch “The China Hustle”

Initial Coin Offerings (ICOs) and unregulated capital raises are winding down. The crypto currency market is down considerably from record highs in early 2018. There is little movement in institutional, synthetic product approvals. Projects and companies are looking for access to additional capital.

Cryptocurrency mining companies and exchanges seem to be eyeing the traditional equity markets. First to market and dominance remain a coveted position. It is no surprise that companies are seeking shortcuts to the markets.

Coinbase, Robinhood, Binance, and Coinsquare all seem to be taking a more calculated, deliberate approach. Whether they confirm, deny, or remain silent, at a minimum, they are making appropriate acquisitions, hires, and decisions to position themselves for a traditional path to the capital markets. Namely, an initial public offering (IPO), where investors actually receive ownership in the company in exchange for their capital, with the expectation of a return on their investment.

There are others that may not have the patience or the desire to spend the capital required to take the conventional path: two-years of audited financial statements, legal and underwriting costs, registration with the SEC, etc.

One short cut is known as a reverse takeover or a reverse merger. Two current examples of these include Netcoins, Inc. (CSE: NETC) and Galaxy Digital (TSX-V).

We can look to the US markets between 2006 to 2012, to get a sense of how this process works, and what type of research one may consider before investing. While a reverse merger can happen with two domestic companies, during this period we saw an influx of Chinese companies gaining access to the US markets through reverse mergers, known as CRMs.

How a reverse merger works:

A private company finds a public company that is distressed or defunct but is publicly listed on a US exchange (a shell company). The shareholders of the private company exchange their shares for controlling interest (the outstanding, voting shares) of the public company. Once this merger occurs, the private company takes over management of the publicly traded company, alerts the SEC and investors through the Form 8-K filing, often accompanied by a name change.

As long as the newly formed merger maintains the listing requirements of the exchange, the stock will trade.

Sounds like a fairy tale, right? Smaller investors have the opportunity to become a part of deals traditionally reserved for the “whales” and institutional investors. Companies have access to a greater pool of capital, can increase their presence, and enjoy global credibility. All at a much faster and less expensive pace.

What could go wrong? Well, there are significant risks. These risks are to be detailed in the financial statement filings. I’ll highlight a few that should be included and why there is merit to their inclusion beyond: “our auditors, lawyers, and regulators require.”

If you read the disclosures, which public companies are required to include in their filings with the SEC, in a reverse merger you should see disclosures along the lines of:

  • Limited experience running a public company – being under public scrutiny involves significant compliance, costs, and experience. Much of the crypto twitter activity we see would be investigated for securities fraud and price manipulation.
  • Brokerage firms and analysts are not likely to recommend – this is due to lack of history and compliance. This could put a strain on liquidity and the ability to raise the desired capital.
  • The cost to comply with the SEC reporting requirements are significant and failure to do so could result in delisting.

It is worth going further back to read the prior filings and research the issues with the shell. It is likely that there were shareholder lawsuits or other outstanding concerns that may remain as a contingent liability.

Now add a few cryptocurrency disclosures and risks:

  • Lack of guidance – currently there is debate in the industry as to how to account for cryptocurrency. Best practices point to treatment as an intangible asset. This means that it is recorded at cost, subject to impairment. The outcome of this treatment is that only losses are reported, and any subsequent gains are not considered. This method further restricts the ability of miners to capitalize costs associated with mining cryptocurrency. Some companies are applying the fair value method and reporting gains. At the very least, one must read the disclosures to further understand how the company is reporting and recognize that this may vary significantly from a competitor.
  • Regulatory uncertainty – there remains regulatory uncertainty, particularly in the US with regard to digital assets. Pending regulation could affect a company’s operations, particularly if they do not have a diversified revenue stream.
  • Inexperience – despite many believing a conference attendance or an acronym makes them an expert, everyone in this industry is inexperienced in some area. Including the auditors. Many firms hire smaller audit firms that may not have the resources or experience, potentially leaving out some critical considerations.

Finally, let’s compound it with a global aspect:

  • These are not necessarily dual-listed companies. One company may actually remain private. Or at a minimum, one company is under SEC jurisdiction and the PCAOB, and one is not. The documentary, “The China Hustle” explains CRMs and short selling very well.
  • Opaque global reporting – global markets does not necessarily translate to information transparency
  • Differences in accounting treatment – While there is convergence in US generally accepted accounting principles (GAAP), China GAAP, and International Financial Reporting Standards (IFRS); we still have differences in each, particularly with regard to consolidations and mergers. And of course, Belarus, I believe may be the only one leading the accounting industry with cryptocurrency treatment.

I raise these risks in an effort to create awareness, learn from history, and forward the discussion on the consistency of reporting. I very much want to see this space evolve and grow, hopefully without repeating some prior mistakes along the way.

In the days ahead, my attention is on the miners and Hong Kong. Bitmain, Caanan Creative and Ebang are all openly talking IPO. The Hong Kong Exchange is likely to be the home court for these offerings. Additionally, Hong Kong is entertaining methods to make it easier for companies to go public. Similar to Canada with the Ventures Exchange (TSE-V).

Bitmain – The success to date of this company is undeniable. It is fascinating to watch their positioning, placement, responses, and activity. I’ve talked at length (yes, great length, another thank you to my gracious hosts and anyone willing to listen) on the Henry Raines Show and with Sasha Hodder on the HodlCast of the figures and ideas currently circulating. Next up is a mining summit in Tbilisi, Georgia, with Jihan Wu of Bitmain and Roger Ver of at the end of this week. The location is interesting as, this is also home to Bitfury’s mining operation.

Additional Resources:

SEC investor guide
The China Hustle
Journal of Forensic and Investigative Reporting – GAAP Difference or Accounting Fraud?

Disclaimer: This article was intended for informational and educational purposes. Nothing herein should be taken as investment, tax, or legal advice. I do not own positions, nor do I intend to take positions in any of the mentioned companies. I hold bitcoin and other cryptocurrencies but do not engage in short-term trading. Some are here for speculation, others for the memes, I’m in it for the disclosures.


Brave Payments for Content Creators

July 24, 2018 • By

Last post I looked at the web browser, Brave. I have since adopted it as my default browser. I love that it is fast, private, and secure; blocking third-party ads and trackers. If you are looking to get exposure and experience with blockchain technology without trading cryptocurrencies, this is a great place to begin.
It’s not going to take you into the dark web, force you to download an entire blockchain onto your computer, upload content to an immutable blockchain or any other misconceptions that might be circulating. What it will do: give you exposure to one a clean interface, provide a user-friendly experience, allow you to receive and distribute BAT tokens within the Brave ecosystem. Along the way, you’ll have an opportunity to learn about two-factor authentication, private keys, and connect a digital wallet. This process is unidirectional, you cannot receive BAT tokens into your wallet and then transfer them out for trading.
Here is a brief excerpt from my analysis I did for Seeking Cryptos when Coinbase announced BAT as one of the possible additions, regarding the team and my experience to date.

It makes sense that this project enjoys successful user adoption and a proven success record to date (see roadmap). Brendan Eich (Creator of JavaScript and co-founder of Mozilla/Firefox) leads Brave as CEO. Brian Bondy, Browser Engineering Lead, has former experience with Khan Academy, Mozilla, and Evernote. Yan Zhu, Security and Privacy Engineering, is an EFF Fellow with prior experience at Yahoo, Tor Project, HTTPS Everywhere, and Privacy Badger. The depth of the team in all disciplines can be found on the BAT website.

For my fellow bloggers, video and podcasters, and other content creators, here is how you can take the Brave Browser experience a step further:

For those of you that have crypto experience, you can probably stop reading here. It is seriously the most seamless signup process I have experienced to date. and EOS should have hired the Brave team for building a token holder voting interface.

  • Click “Get Started”
  • Enter your email and verify
  • Enter your name
  • Set up 2FA (two-factor authentication) using google authenticator – Scan Barcode
  • Add Channel (big button to the left of your name) – Website, YouTube, or Twitch
    1. If you have a WordPress site, there is a plug-in. Brave will take note of it and walk you through step by step.


Add or setup an Uphold Wallet. Note you can do this directly from within the Brave Payment Dashboard. Fun fact for anyone new, Uphold has a useful Cryptionary on their site.

What’s next? Consumers of your content, when viewing it in the Brave Browser, will have an opportunity to allocate their monthly BAT to your website/wallet.

If you think I am missing a step or have any questions, let me know.


This post is provided for informational purposes only. Nothing herein shall be taken as legal or financial advice.

Disclosure: Author holds BAT tokens received through the Brave Wallet for educational purposes and use within the system. 

The Henry Raines Show, Token

Brave Browser Revisited

July 17, 2018 • By

Last week I stepped away from my daily routine, environment, and work. Of course, even a slow week in crypto generates plenty of news and often on Friday afternoons. Missing the crew, I stopped at the studio on my way back into town.

Coinbase managed to drop a short-list of potential cryptocurrency candidates that it may entertain making available on its platform. Basic Attention Token happened to be one of these tokens, which I have a general familiarity from earlier reads and uses.

What is so lovely about the Basic Attention Token (BAT) is that there is actual product that is useful to even those not interested or involved in cryptocurrency. BAT is to be used with the Brave Web Browser. I briefly used Brave earlier in the year but had a few cumbersome moments that I returned to Chrome.

In an effort to clean up and follow up my limited remarks on the show, I decided to revisit Brave. There have been significant improvements since I last used it and additional functionality worth highlighting. Brave is free to use. It is a web browser. Download it here or directly visit

The Brave FAQs do a terrific job of explaining Brave Payments. The following is an overview geared toward noncrypto enthusiasts who may be interested in participating in the ecosystem and supporting the concept that makes this browser beautiful.

I understand the concept behind Brave and BAT to be more of a user driven advertising platform. Ideally eliminating the data mining method of inundating users with ads related to their recent searches. From their whitepaper, I recall an interesting piece was that it would be able to measure user attention based on active windows and reward publishers based on engagement.

The Brave web browser is designed to block third party tracking and advertisements. For example, if “golf” is included in my search in other browsers or on social media platforms; immediately ads begin to appear from golf suppliers or based on the websites that I visit, related advertisements appear. A secure and anonymous algorithm power the platform, so contributions truly are anonymous to Brave and all other entities.

One can elect the search engine of choice. I have been a DuckDuckGo fan since their inception.

Advertisers, publishers, and content creators can use BAT to pay for user attention.

Individuals are able to support favorite sites using BAT with the use of a Brave wallet found in the browser settings. Currently, Brave will provide 15 BAT to new users. The team has made it incredibly easy, literally a toggle switch and an exercise to prove humanity.

For those interested in continuing to reward sites, there are instructions on obtaining additional funds. This is a one-way ticket. Once BAT is in a Brave wallet, it can only be used as intended; to reward website publishers at the holder’s discretion. BAT cannot be earned, purchased, and transferred out of the Brave Wallet to be traded on an exchange. Use it or lose it. Tokens have an expiration (at least those rewarded by Brave here).

To reward content creators, navigate to preferences and payments. Browsing history appears in the payments section of Brave Preferences with the option to include the provider in the allocation reward.

Now that I have had an opportunity to revisit Brave, I am looking forward to employing it as my default browser. For content creators interested in exploring Brave, I suggest starting with the FAQs. Cryptocurrency enthusiasts can find additional trading and investing information at Seeking Cryptos.

This post is provided for informational purposes, nothing herein shall be taken as legal or financial advice.

ICOs, Token

What is Trans-Fee Mining?

June 27, 2018 • By

The “Trans-Fee Mining” model seems to be growing in the smaller, exchanges as evidenced by a couple of recent news stories on FCoin and Bit-Z, CoinBene, and BigOne. Liquidity challenged, smaller, cryptocurrency exchanges compete for users and funds. Exchanges adopting this model seem to be enjoying record volume.

FCoin, based out of China, led by former Huobi CTO, Zhang Jian, (according to this paid press release) is perhaps considered the pioneer of this model with Bit-Z and CoinBene implementing similar models.

Using the FCoin whitepaper, here’s a brief look at how this proposed model will work. It is important to add forward looking emphasis, as the project is only a little over a month old with most of the concepts still waiting to be tested in the months ahead.

FCoin (FT) is an issued token, it is not mined.

FT provides transaction free mining. The platform charges fees, payable in BTC or ETH and then issues FT to reimburse 100% of the fees. It functions similar to a reward token, giving the trader FT as a reward for utilizing the platform.

Total Supply = 10 billion

Token Distribution

Private Sale = 5%
Strategic Partners = 9%
Founding Team = 12%
FCoin Fund = 23%
Community Rewards = 51%

The FT tokens in the Community Rewards serve as the reimbursements.

What may be some of the potential benefits and uses of this model? For the exchange, this certainly would increase the supply of BTC and ETH. Additionally, with ICO fatigue, and projects looking for innovative methods to increase user adoption, this will serve to distribute the token and increase network effects. Finally, the exchange will see increased volume.

For the FT token holder, the rights and interests are:

  • Revenue distribution – 80% of the revenue will be distributed to token holders and the remaining 20% will be used for operations and future growth
  • Voting – FT holders will be able to vote using smart contracts on operational decisions and governance

So far, transaction free trading and participation in an autonomous organization sounds ideal. What could possibly go wrong? Let’s have a look at some of the criticisms raised to date, mainly by Binance Co-founders:

  • Is it an ICO? The user is paying BTC or ETH for the token. Albeit, there is the utility of a trade in the mix, substantively it resembles an ICO.
  • With “no fee” trading, it is possible to “create” fictitious volume. Traders may trade with themselves or a bot., an exchange aggregator, will not include trades from “no fee” exchanges in the price and total trading volume because it is not possible to verify the true volume.
  • Token price manipulation. Even if the platform is transparent, the team and project control a significant amount of the circulating supply. It does not seem difficult to imagine a bot or a small number of individuals could quickly earn a majority of the community.
  • Is it sustainable? After distribution of the tokens, how will the tokens re-enter the ecosystem?

The screen shot below of CoinBene on CoinMarketCap demonstrates some of these potential concerns. You will see the significant volume and “**” indicate that it cannot be counted toward total volume for the trading pair. To give reference, I’ve included Poloniex volume also. If you are following “Tethers,” you know that a recent study found limited “Tethers” returning or burning. Perhaps they’re all stuck on CoinBene?

Airdrops, ICOs, The Henry Raines Show, Token

Start Here

June 11, 2018 • By

Interested in learning about cryptocurrencies and blockchain? Having trouble consuming the literature and filtering the noise?

FRESCO co-founder, Roy Huang, joined us on the Henry Raines Show and shared a way that you experience the process without risking or surrendering any fiat currency.

After learning about FRESCO, reviewing their whitepaper, and engaging with several members of the community on twitter; I was delighted that Henry coordinated a guest appearance with Roy. His warmth, enthusiasm, and sincerity naturally create an engaging environment. Reminding us that it is possible to leverage our existing strengths, talent, and social platforms to contribute.

What is FRESCO?

A blockchain application (DApp) that serves to create an awareness about art, reduce the opaqueness of the industry, verify authenticity, and create a navigable path for newcomers. Do you consider art a store of value? If your answer is no or you are uncertain, now is the time to explore and expand. By leveraging blockchain technology, FRESCO seeks to increase the number of participants in the world of art. You can learn more by listening to the show, reading my review of their whitepaper, checking out the artist amongst us on the show, Augi, or have a look at the FRESCO site and whitepaper.

I’ll highlight one of my favorite parts of this token: the incentive to learn. Not only about art, and blockchain, but about the economics surrounding both. The FRESCO community gives a detailed walk through in this post. Briefly, when an artist creates a work, for example, a print, s/he has the opportunity to create multiple editions. What is the right number of “editions” to create? Through FRES Edition, owners will be able to experiment with the appropriate number to offer. If an owner believes that s/he can generate interest by creating 25 multiples, s/he can allocate the token FRES Cash to reproduce and issue 25 FRES Editions. These must be ‘transferred’ to investors within 24 hours to be deemed a successful issuance. If not, the owner has the opportunity to revise the number of multiples. Once issued, collectors, dealers, institutions, and users have the opportunity to contribute additional FRES Cash toward the artwork, increasing the value of all editions. The FRESCO team is attracting experts in all areas of the art world, providing a transparent platform where one can learn by watching, engaging, experimenting, and doing.

Photo by Ian Schneider on Unsplash

Confidence in their product, a passion for giving emerging artists a voice, and expanding the art investing market; FRESCO secured funding (most recently from Elastos co-founder, Dr. Feng Han) and abandoned an effort to raise capital through an ICO. Rather than put retail investors at risk during this time of uncertainty or delay participation, FRESCO is conducting an Initial Coin Distribution (ICD). Through the ICD, you have an opportunity to earn 2,000 FRES tokens, experience some basic elements of utilizing blockchain technology, and gain an understanding of the art market.

There are several ways to participate:

  • Register for the ICD. It is in the final stages, and requirements vary depending on whether you are or are not actively involved in the art world. The theme of this version is “The Art Expansion”
    If you are not in the art world, you’ll need to upload a video of you conversing about art to YouTube, twitter and Instagram with #FRESCOArtExpansionv5.
    Next you need to take a 100-question test about art.
  • FRESCO Awards. Use your talent to share with the world what Art and Blockchain mean to you. There are weekly awards for writers, designers, and videographers. Additionally, there is a special Art Award running through August 22, 2018.

Before you start:

Learn how to set up an Ethereum Wallet. If you do not have experience is setting up a wallet, now is the time. This is a perfect way for you to understand the difference between public and private keys in cryptography.

Recommended wallets include, My Crypto Wallet or My Ether Wallet. Both have tutorials that are exactly where you should start in understanding some basics. Learn about browsers and extensions that are compatible with the blockchain through MetaMask.

Even if you know the basics of phishing attempts and scams, I see these happening regularly throughout the cryptocurrency world and on social media. Reminders of insuring that you are on the correct, secure (https://), website and best practices are helpful even for seasoned experts.  Once you get a comfort level, it is easy to be tempted by scams. Many have learned this lesson by experience and losing a transaction. In an effort to curb that I’ll repeat my regular PSA … legitimate airdrops, distributions, circulation of tokens DO NOT ask you to send BTC, ETH or any other cryptocurrency, or fiat currency. Do not fall prey to false social media handles (often with a slight transposition of characters or addition of numbers) encouraging you to send .03 BTC for the token.

Photo by Austin Chan on Unsplash

This blog is provided for informational purposes only. Nothing herein shall constitute legal or financial advice.

The Henry Raines Show

Why is Bitcoin?

May 29, 2018 • By

Last week started with an article where the president and CEO of the American Institute of CPAs, Barry Melancon, called for accountants to embrace emerging technology, particularly the blockchain. Sadly, his choice of words may not have been the best in mobilizing the profession. I trust his intention was to not allow the fear of technology to be the reason we ignore it.

“We don’t need to really understand the underlying software,” he said. “It’s the implications and power of blockchain that are more important that (sic) the actual software.”

I disagree. I believe that we do need to understand the underlying software. Not to the degree of being able to program or develop, but we need a clear understanding of the terminology, applications, and how certain platforms differ from others; particularly as it relates to our respective disciplines. For example, my work with retail clients. I cannot write code for a point-of-sale system, but by learning the underlying systems, I know where to look for vulnerabilities and determine if an area requires additional controls.

The first questions I am asked by my peers interested in learning about blockchain is generally one of the following: “How do you know all of this?” “Where do I start?” “What is Bitcoin?” or “When should I buy bitcoin?”

I had the pleasure of being in studio for The Henry Raines Show this week where we had, Bitcoin pioneer, Charlie Shrem, of Crypto.IQ as a guest. A powerful reminder that what you read and hear  is not always a complete story or worthy of developing an informed opinion. Charlie left us with a final thought, the one question we fail to ask, should be our starting point.


“When it comes to Bitcoin, don’t ask ‘What is it?” ask “Why is it?”


Start with “Why?” And if you think that our current processes and systems are working, if you cannot recall some accounting scandals, failed regulation, or even relate to an example of occupational fraud, I have a primer for you: this presentation by Caitlin Long. Regardless, I urge everyone to watch. She does a remarkable job of explaining the overleveraged nature of our current economy and highlights a couple of accounting examples where “we” could never arrive at the same number twice.

For those who revert to asking “What?” and remain comfortable with stopping at the uniformed answers of a Ponzi scheme or “Tulip Mania,” I ask that you refrain from draining the limited US resources in convincing you otherwise at this time. “Why?” As you will hear from both Shrem and Long, the US is so far behind in this space.

We need to leverage the resources of the accounting professionals and local leaders like Joel Greenberg, the Seminole County Tax Collector (and another great interview) interested in moving our community and country forward.

Both interviews and the presentation have downloadable audio. No excuses. Find the “why.”

This post and the contents included are provided for informational purposes and shall not be considered legal advice.

Photo by Ken Treloar on Unsplash

Airdrops, PPI


May 15, 2018 • By

This past week on The Henry Raines Show, I talked about airdrops. I have been contemplating what token projects to use as an example for my blog and assisting colleagues interested in learning more about cryptocurrencies, coins, or tokens. I needed a “Rock Castle Construction,” (the iconic QuickBooks® sample company file).

Open Source Accountant at the ready.

Silicon Valley, a show airing on HBO, recently aired episodes surrounding Initial Coin Offerings (ICOs). Shortly after, a clever, well-versed in both the show and the cryptocurrency space, personality appeared on twitter as @PiedPiperCoin.

In less than six days, this handle managed to produce a wealth of humorous tweets and material, as well as developing an ERC-20 token and distributing it through an airdrop.

I consider myself a connoisseur of low-end whitepapers and tokens. What this handle has managed to assemble in such a short period of time is remarkable. It is the perfect hypothetical (I’ll reiterate it several times … it is a meme, satire, I do not recommend buying, selling, trading or doing anything other than enjoying the show). @PiedPiperCoin ($PPI) has constructed a far more transparent project than many of what I have seen. No funds were solicited, and $PPI has provided transparent, timely, relevant data for me to use as examples for many posts and lessons.

What exactly is an airdrop? They typically are the disbursement of native tokens (for future or current use on a platform/project).  Many refer to them as “free,” I prefer to liken them to a coupon. They can be provided as the result of a fork, a bounty, holding a particular currency or wallet, or being on an exchange. I’ll address forks and possible accounting implications for the ICO in future posts. With social media and larger technology companies banning advertising of ICOs, an AirDrop is an alternative method of creating awareness for the token and project by distributing the native token to potential users.

The first airdrop utilized what I consider a set of best practices as a consumer signing up for an airdrop. Most ICOs will ask you to register for an airdrop, providing the Ethereum public address to send the tokens.

  • Protect your private keys. – $PPI asked for your public, Ethereum Address and provided instructions on how to sign up for the two primary ERC-20 token wallets. (and MetaMask) provides a detailed safety tutorial on the difference between public and private keys.
  • Use caution when downloading native wallets of smaller projects – ($PPI) does not have a separate wallet nor a website requiring registration.
  • Do not click on redirect links to wallets – $PPI gives explicit instructions on how to be certain you are at the correct website with SSL certificates and “Secure” is noted in your browser.
  • Do not send cryptocurrencies in exchange for the airdrop – The $PPI did not ask you to send ETH in exchange for $PPI.
  • Beware of scams and hijacked accounts – someone is already scamming the satire!

  • Do not share personally identifiable information (social security numbers, government issued id’s, banking information, etc.) $PPI asked for a few, basic public identifiers and references to the show. (Public Ethereum Address, twitter handle, a link to a tweet about the airdrop, and a couple of TV show references in a Google Doc)


After the airdrop completed, $PPI published a post on how to check for your tokens and an additional post covering the history and possible future of the project. I am happy to see in this update that $PPI is going to take some time to focus on the project and building out the team (I can barely keep up, I’ve had to put my cat to work).

I spy $PPI … tokens in my wallet.

$PPI is offering an additional type of airdrop, a social bounty.

I am looking forward to blogging about the additional events and accounting for the transparent smart contract in the days ahead.

This blog post is for informational purposes only. Nothing herein shall be construed as financial or legal advice.

The Henry Raines Show

Traveling the world to find digital assets next door

May 6, 2018 • By
Headset on the microphone with the "On The Air" light on.

For the past few years, I have been floating my interest with blockchain technology and cryptocurrencies to peers, family, and friends. Generally, I failed to elicit the necessary enthusiasm to yield more than a one or two minute exchange.

One or two minute exchanges grew logarithmically with the price of bitcoin and introduction of alt coins and tokens last fall.

The possibility of access to transparent, immutable, real-time data to make financial decisions is what attracted me to this space. With the surge of Initial Coin Offerings (ICOs) in 2017, visions of consuming financial statements danced in my head the first quarter of 2018. Needless to say, I am starving.

After reading several white papers, I routinely searched for financials looking to see how people were accounting for minted or pre-mined tokens. Would the liability be mark to market?  Would the offset of 1 million token inventory plague balance sheets as “Opening Balance Equity?”

After attending a couple of local events, I was thrilled to find genuine interest and people willing to tolerate my curiosity beyond a placating smile. I had the opportunity to be introduced to some incredible talent spanning multiple industries and disciplines. You can hear many of these voices on The Henry Raines Show discussing the current developments and news related to bitcoin and cryptocurrency each week.

In my short time of being acquainted with participants on and off of the air, I have already been overwhelmed by the depth. While the show should not be taken as investment advice, and exists to inform and entertain; it has proven to be a catalyst of many thought provoking questions that I look forward to exploring in the days ahead.

Last week, Andy explains the concept of Over-the-Counter (OTC) trading and how it could bring more stability to the cryptocurrency market. I introduce a segment called “Token Troubles.” 

This week, we discuss Goldman Sachs’ formal entry to the space, continue following the debate as to whether bitcoin and other cryptocurrencies are a commodity or a security, and consider implications from the recent class action lawsuit against Ripple.

In the second half of the show, we welcome Terry L. Brock, MBA, CSP, CPAE, a prominent speaker, syndicated columnist and video blogger to the show as he inspires author Sabine Priestley and me to explore some of the dApps available for content creation.

You can listen live every Saturday to The Henry Raines Show on WWPR AM 1490 from 12-1:30 PM Eastern or catch it in your favorite podcast platform.


Have you seen a blockchain shoebox?

April 2, 2018 • By
Big Pile of Stacked Shoe Boxes

With the number of Initial Coin Offerings (ICOs) increasing in the last quarter of 2017 and continued surge in 2018, I sense that there should be some “virtual” shoeboxes starting to fill corners of tax preparers’ offices.

I realize that not all of these are US based, have US employees or contractors, nor transact in the US. I am also aware that not all of these offerings are by individuals intending to comply with federal and state tax laws.

For a look at those well-intentioned participants, transacting in the US and may be seeking professional tax assistance … this is what I envision would be under the lid of that shoebox:

  • tokens issued to employees and contractors with value
  • exchanges of USD, crypto currency, and the token
  • transactions for USD, crypto currency, and the token
  • 1099’s with no basis for individuals trading cryptocurrencies
  • a few pieces of paper with long wallet addresses
  • transactions with 8 or more decimal places

It is with these well-intentioned individuals, my dedicated colleagues who deserve a few restful hours, and my enthusiasm for what the future of the accounting profession may look like as it evolves with the latest technology that I launch this blog and my practice.

There is plenty of fear, uncertainty, and doubt (FUD) in this space. However, the position of the IRS is known and I will begin with how we may address the knowns.

This blog and my practice are for small practitioners who may not have a crypto department, but have clients transacting in cryptocurrency or issuing ICOs.

Should you need assistance calculating payroll tax liabilities for alternate payment methods, navigating the blockchain, exchange rates, basis, have clients interested in accepting alternate payments, or other needs in this space, please get in touch.

For those projects and organizations that are considering issuing a token, I urge you to seek the advice of an accountant. It is imperative not only for tax planning, but also to test your model with some supply and demand scenarios.

Creating a token is neither a one-sided entry nor free.

I welcome comments and interaction. This is a centralized blog with my fellow practitioners in mind. So please see my blog guidelines here.

T-Accounts, token economic models, software examples, and ‘80s references (as my humor is not as advanced as my technology adoption) in the days ahead.

This blog post is for informational purposes only. Nothing herein shall be construed as legal advice.