Director of digital asset research center of Tsinghua Luo Mei: the development of securities regulatory and tax regulations and accounting standards, will promote the development of the P.O.D industry chain block | new potential Summit

 Director of digital asset research center of Tsinghua Luo Mei: the development of securities regulatory and tax regulations and accounting standards, will promote the development of the P.O.D industry chain block | new potential Summit In November 28th, 2018 P.O.D New BlockTrend new potential block chain summit jointly sponsored by Odaily and the daily planet 36Kr group held in Beijing. The meeting, doctoral tutor, Tsinghua University School of economics and management director of the center for financial research on digital asset sharing Luo Mei entitled “financial distress” encryption of digital currency speech.

Luo Mei mainly from the angle of accounting, analyzes the financial distress of digital currency. Now the United States and relevant laws and regulations such as digital currency, securities law, tax law, accounting rules at present has not established. Luo Mei to block chain project as an example, from the side of the project, investors, employees and other point of view, of which relates to the digital currency accounting and financial distress. Luo Mei think, whether it is the development of securities regulatory and tax regulations and accounting standards, there is a need to match each other and update the system framework, although it is quite a long process, but the healthy development of the industry chain block, is a very important support.

The following is the speech Luo Mei, abridged:

Hello everyone´╝ü I am the school of economics and management Tsinghua University teacher, Center for research on digital assets are based on Financial Economics and Management College of Tsinghua University, research center is the only Chinese Turing Award winner academician Yao Qizhi led the Tsinghua University Interdisciplinary Information Sciences and International Academy Su Shimin together to provide support and the establishment of cross disciplinary internationalization. We hope that through this academic research center to create a number of financial assets, financial assets and promote the digital enterprise integration and innovation, especially in the field of design rules and regulations to build a leading global research platform.

The block chain caused economic and financial accounting, such interest, because the encryption of digital currency, more and more scholars especially in the fields of economic management research scholars have great interest in it.

Since the birth of the encrypted digital currency, mainstream economists pessimistic thoughts, especially the recent slump in the price of money, let us economists hold the view that the original verified. Regardless of the currency price decline is caused by what factors the blockchain does provide some scenes of the original economic field cannot be verified for us economists. So for economists, they can go to the original validation study cannot use block chain distributed organization, this is a place where economists think the blockchain very valuable.

Professor He Zhiguo recently academic advisor to our center (Professor of University of Chicago Department of Finance) to do the research on mine pool operation, theoretical study on the economic mechanism of mine pool operation. There is a very famous professor of finance, the economic mechanism of the bitcoin transaction costs. As we all know, when bitcoin is out, the rest of the incentive mechanism from the transaction cost, the transaction cost will be more and more high? What this will affect the stability of bitcoin blockchain? So the professor in this area do such a study. In addition, our center academic advisor academician Yao Qizhi did a study, he commented on a new bitcoin incentive mechanism design. We can see that for mechanism design, the academic circles have new ideas constantly.

For financial experts, the most influential is probably the beginning of market manipulation bitcoin price point of view, such as a finance professor found that someone is trying to control through the Tether bitcoin currency price. There are some financial experts in the theory research of the pricing model, but the theoretical model about the price of a lot of money, so the current financial experts also establish their own theoretical model.

I first made a small empirical research, in that period we found activity on the GitHub block chain project is the supporting role of currency prices, but recently this period of time not to have such a relationship. So the development of the blockchain very quickly, the cause of support in various stages of the currency price is different. Such as the recent currency prices, saying the parties are not a center, we recently engaged in a campaign, invited the founder Yanchel gross founder F2Pool bank “God fish” and Libet mining pool BTC.TOP, to share their reasons that currency prices. Of course, the reason is very complicated, we are also concluded according to the experience, now is not a good model to guide you.

To do a lot of quantitative trading, they will get a return by a very short period of time. For example, some people use their own experience and strategy by BCH hard bifurcation, obtain excess returns in a short period of time. But in fact, I found that their experience is irrational established in public for market awareness and get a strategy, actually their strategy does not necessarily explain currency price, but they use the irrational price on the market at that time, in order to get a profit. Before the bifurcation of a lot of people think BCH hard bifurcate, who is more high, whose currency price is higher, but it is not, and the correlation between currency price and no relevant studies.

For the accounting industry, currently professor of disclosure influence on project financing amount on white paper information, but overall research on this aspect is very few. Because of my accounting research more deeply, so today to share with you about the plight of the financial accounting digital currency.

I had a recent working paper, in the center of the public number, combing the accounting measurement method for bitcoin digital currency. In fact, because a lot of funds, ore pool, exchange, the project has digital currency, but whether the international accounting standards and American accounting standards, are not for the digital currency accounting standards, the big four accounting firms have caused a lot of trouble. Ask whether the United States or Hongkong or domestic accounting firms, they can tell you the official digital currency should be based on what to measure. This is because the digital currency accounting standards has not yet appeared, but in practice there is such business requirements, listed companies must make the measurement of digital currency, project and funds need to record digital currency, but how to record? I made a comb, first to talk about now associated with the digital currency regulations in the United States, such as the securities law, tax law, accounting rules.

A digital currency securities law, we are also in the issue of digital money for one of the most simple and convenient way, so the securities laws is not particularly clear, this will affect the formulation of some accounting rules behind, so you can see when the project to send money in the United States, they will consult with a lawyer, tax lawyers, accountants, the party is indispensable, because everyone is looking for a unified feasible way trying to issue digital currency. For example, Utility Token, and now everyone in the discussion of STO, these securities regulations do not specifically say how you should be, so everyone in these regulations find their exemption regulations to follow. In fact, the project to send money in the United States, we will set up the foundation for tax avoidance in overseas to avoid taxes, but this practice is not long.

Tax regulations, the tax regulations did not follow the United States to IRS as the representative of bitcoin virtual currency in 2014 (Virtual Currency) in accordance with the property (Property) instead of securities to pay taxes, so even if the project now to Security Token name to raise funds, the bitcoin, Ethernet square, or need to pay taxes.

The accounting rules, the securities regulations still uncertain fuzzy state, so IFRS and GAAP are not alone to develop digital currency accounting standards.

Although these regulation very far away from us, but I think the academic institutions to do cutting-edge research leading. Next, I want to block chain project as an example, for everyone to sort out which refers to the financial distress.

 Director of digital asset research center of Tsinghua Luo Mei: the development of securities regulatory and tax regulations and accounting standards, will promote the development of the P.O.D industry chain block | new potential Summit For the project to send money, for example, is financing bitcoin, Ethernet square from investors, whether it is from the process of accounting measurement of tax regulations or securities perspective or a discussion or a place where the most tangled. For example, some projects set up in Singapore, the raise bitcoin does not need to pay taxes, but some American project is released in the United States, how to account?

Project financing produced after token will be distributed to investors, the project will also part of the retention, this part is how to charge? Project token is a private income or expenses? Now popular is usually put it into income and expenses. The project can be said that this is his company due to the development of technology produced by Token, so the equivalent of the company internally generated intangible assets. This project without a return, do not pay taxes, the accounting treatment is also very simple.

The project may also come to the digital currency in the form of wages to employees. Because many projects do not want to send money, since my company has its own produce so much token, so I can send staff salary, employees are expected to have this token. In the United States, if the employee’s salary in the form of token, so many employees with relevant tax valuation. But if the token in the exchange, on the network before it was issued to the employees, how to value? Even if the exchange, on the net, the volatility of currency price is great, should be every day or every other year to adjust the valuation of the valuation adjustment?

There is a drop (airdrops) for the project is how to account, this involves being dropped people tax problems.

This figure only shows a single project, in accounting and tax measure will have such a complicated problem, so not to mention fund.

Next I briefly talk about the accounting measurement of digital currency me do.

Digital currency in accounting measurement on no entity, not being a single entity control is already a consensus, it does not have a central endorsement, so it is not legal tender is not real and connected to the electronic currency, the main role is to pay and exchange value. It is not the same as with the token, now token definition is more and more fuzzy, token we defined simply as it is in Dapp token, I think the digital currency (Cryptocurrency) is a chain of the original money.

Digital currency is facing some financial difficulties with the United States and IFRS did not separate accounting standards to regulate the relevant. Each project will have a variety of purposes and to define their own token, produced by the method of accounting measurement is very different. I simply to bitcoin payment for the purpose of digital currency accounting as an example, we should first look at it in the end is owned by what kind of body? To what purpose hold? What kind of assets? How to measure? Digital currency mining output, its purpose is to hold, not necessarily a dug to sell. Some are for sale for the purpose of digital currency, such as encryption digital currency two market quantitative trading company. And to invest for the purpose of digital currency, such as private equity investment projects to obtain digital currency block chain project issued.

To hold for the purpose of digital currency, now in the accounting measurement is the intangible assets in accounting. Mining output (assets, income, cash (cash) not containing currency), instead of cash equivalents, not on behalf of a entity rights, unlike the financial assets that based on contract basis. The general practitioner is counted as intangible assets, with the initial cost, the initial cost to measure the fair value of digital currency.

But the measurement of intangible assets is difficult, in general, assets is supposed to bring future cash income, especially the assets of this plant and equipment can bring about future cash income. But the digital currency without this effect is more like a store of value, so it is not in line with the characteristics of our long-term assets, intangible assets. There is a digital currency to assets listed in the list, we all know that in the balance sheet, assets are arranged according to their liquidity. For example, the machine plant is short selling, so that long-term assets. But the digital currency actually very strong liquidity, you can sell it at any time, the equivalent of cash, if the column show will distort the balance sheet in the inside of the intangible assets.

There is a distorted operating cash flow, we all know that judge the survival of an enterprise is good, is to see business cash flow, the company’s own ability to cash flow from operating activities. If we sell digital currency to get the cash flow cash is actually placed in the investment activities, rather than operating cash flow, which is characteristic of intangible assets. Liquidity so operating cash flow table can not reflect the digital currency. Of course, there are other problems, such as what to do when the impairment test. Whether we should do every day when the currency price plunged impairment, if the latter up how to do. There are some for sale and investment for the purpose of receiving token, the relevant accounting definitions are not the same.

In addition, if the tax can be very convenient with the digital currency will be in the form of. Because the received a bitcoin project financing side, there is a big pain point in financial management, is to consider the digital currency for currency to pay taxes, or a coin currency appreciation of space, the project side should keep money. And because of the volatility of currency price, how to receive money into cash, this is also a very big difficulty.

So, whether it is the development of the securities regulatory and tax regulations and accounting standards, there is a need to match each other and update the system framework, although this is a very long process, but the healthy development of the industry chain block, is an important support.

Well, today I share here, thank you!

  

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