BBW23 – Day 1 – Blockchain & Crypto Accounting & Technology

[Music] hey how's everyone doing with the last one of the day so we we the headliner everyone else is a backup crew that's what we're here for okay so let's see so you guys are in for a tree we got a real diverse group here we we're going to have blockchain crypto accounting technology we we got the full gamut here and you'll see a well-rounded group here too so so let's see here so for from an introduction standpoint I'm going to ask you all to kind of introduce yourself but we so first I'm going to introduce myself so I'm Rob S you heard and I am a professor of practice at wor the poly Technic Institute I teach Finance fin Tech and Mis I'm more Tech fin than fintech I was in industry for 31 years the last 23 with Fidelity Investments and I'm having a blast teaching all these students here too so but I also want to have you guys say you know not what your company does you heard that from me but I ALS also I want to know what your um what your passion is you know and your hobby okay so I'm going to tell you so my passion is basketball I love playing basketball I play it all the time and my hobby which is related to it I'm a certified eyebow ref so I I I ref high school ball so I'm telling you guys right now quamy especially you if you're in the 3 second I'm going to I'm going to count you out so make sure you're ready for this so uh Rebecca I'll hand off to you for introduction can you guys hear me okay um all right so I'm Rebecca perazella I lead the outsourced Accounting Solutions group at Wolf and Company uh wolf is a CPA firm um in the Boston area and we have about 350 professionals uh we provide uh you know wide variety of services mostly audit tax um accounting and Risk Management Services um me my group personally we do outsourced accounting so anything from bookkeeping to Virtual CFO work work and you know everything in between um personally my passion I would say is cooking I really enjoy uh something I really look forward to and and I enjoy sharing with others um kind of hand inand with that one of my hobbies is um entertaining so I really love to host themed parties themed dinner parties um holiday parties uh so I think if I wasn't in accounting I would probably be doing some sort of event planning um and not necessarily a hobby but I am a new mom so that takes up a lot of my time as of recent as well so so what's your what's your go-to meal at Thanksgiving that you make goto meal at Thanksgiving is probably my grandmother's stuffing um is the dish that I usually make wow what do you put in it anything special everyone has a little special something it's cornbread stuffing nice very nice so next we have Aiden Aiden yeah thank you Robert uh it's great to be here today my name is Aiden ya I'm the co of uh node 40 and essentially we're a data analytics firm that provides accounting and financial data from the Block mostly from the blockchain but also offchain and we sell that to mostly to accounting firms like wolf um to help their help them with their clients who come up with really crazy not necessarily always crazy but usually complicated things that they're doing with digital assets I like to think of us as the paler of digital assets if you're familiar with paler um I'm originally uh got involved with note 40 actually as an investor um I'm a member of local uh Angel group called uh Chain Reaction which uh is Boston based but we invest globally in blockchain oriented companies I know there are a number of members here today so I like to think that came full circle here um in terms of being having the Boston Nexus to node 40 um as for hobbies this is kind of very not crypto at all but uh I really enjoy shell fishing uh I've done it since I was a kid it's a kind of a family tradition I love getting oysters and clams when I have a recreational license out in wly in the cape I really enjoy doing that my my spare time you don't go into the lobster Poots do you I do not cuz I I I understand it gets really violent having my limbs and so in my life so I don't mess with the lobster BS awesome thank you aen and the quami Dumar yes so good afternoon thank you all for being here I'm kwami Dunbar associate professor of Finance at WPI now my work unlike my colleagues here my practitioner colleagues is that I do research and put it out in the practitioner space I work on cryptos examining um adding cryptos to portfolios optimizing cryptos within portfolios as a new emerging investment class looking at certain I want to call it f Tech tools how these tools such as AI you know blockchain can be used within the crypto space but also when we look at for instance a central bank digital currency that has been discussed um using AI in Investments as an aid right to um you know Traders or investment managers how they could actually use this in helping the decision process um outside of that you you know you know outside of teaching courses in also in um in in in fintech I'm also the director of our recently launched Masters in fintech at WPI now when I'm not working or writing papers I enjoy traveling and of course fishing what what's what's the biggest fish you ever got and there supposed to be a good story behind this uh I'm still working on that still working on it let me just say that yeah okay okie do okay we get we're going to get right into the questions now so Rebecca I'm going to start out with you right so for you know at a wolfen company what challenges do you see with emerging growth companies in the crypto space what do they experience what challenges as they're starting out yeah so clients are potential clients when they come to us for assistance um when they're you know pretty early stage um you know one of the challenges they face is that they know their business really well they know the day-to-day operations in and out um what they don't know necessarily is how to then get that kind of institutional knowledge and then um you know transactional data that might live on the blockchain into a set of usable financial statements um and I think you know early on you don't have that infrastructure set up most of the time and it can be a bit of a daunting task um so I I think Step One is is certainly getting the right team in place and you know that might be an internal hire or a set of set of internal hires or it could be a third party service provider but I think you know no matter which way you go you know what what you choose for the the team you're working with it needs to be a team that is um has the right expertise in the industry um because that team is going to work with you to really implement the accounting um Pol policies and procedures processes tools and Technologies all of those things um that's going to you know bring you forward and that you're you're going to have to live with those decisions you know later on down the line so it's it's important to get the right team in place to work with you to get the right technology stack in place um the right processes in place to move forward on the right foot now now now what do you see because it's so deeply technical right but and a lot of people don't understand it even one of the questions previously like layman's terms like how's what about the communication what what do you see is to have them really get through some of those challenges do they make it Tech do they make it layment do they do both yeah I think um a bit of both is needed I think you know there's a lot of um business owners are are so very technical but I think breaking it down into layman's terms really understanding um from a practical standpoint what is needed and and how to kind of make it usable for the the team and the the organization as a whole um is is important yeah yeah that's huge okay we're going to switch directions a little bit here so for quami I got a question for you so I mean we you know Boston blockchain week you know people talk about global warming um you know climate change are there aspects of blockchain from your perspective that make it you know that make them is it makes it a suitable tool for sustainability initiatives that are going on out there what do you think yes thank you great question so um you know quite recently we have been discussing the carbon trading Market in particular and looking at the entire issue of what's called greenwashing right and you know as it relates to ESG products and when I say ESG environmental social and governance um most of these products there's you know issues you know around the level of rating that they that may be assigned in terms of um an ESG rating right um recent you know as as recent as yesterday there was a firm that was assigned a rating that is questionable given its track record in in the in the in the field now one product that we're researching looking at currently is how we can apply blockchain in this kind of environment given its um track record of um you know transparency security and you know that ability that will allow us to you know lock or or or you know be better able to capture and record using the technology right the blockchain technology so I think it it it possesses a lot of opportunities in that area that we could address that greenwashing issue that has been a perable issue quite recently wow thank you quami that's awesome so hey now we're we're going to get you going here now too so ready from what you see right at node 40 right how is accounting for crypto and blockchain you know different than other than other you know more traditional type assets that we have out there what what what's the big difference yeah thanks you know and I think for those of us who've been in the blockchain community for a while you hear this a lot it's like it's it's the same but totally different right and I think the same thing applies to a Accounting in blockchain you know I think fundamentally what we see is that there is and I think um Rebecca hit on this earlier about just the lack of infrastructure I think there's a lot of assumptions that when you're doing certain transactions uh involving digital assets whether they're on the blockchain or on an offchain that all that data and all that financial data just automatically comes it doesn't and so and so a lot of times like if you're not just doing a a straight trade maybe you're staking for example if you're familiar with maker for example that creates some really weird data exhaust on the blockchain it looks like a buy and sell but it's not a buy and cell at all so what we have to do or what one of the things that we do at node 40 is we go a level deeper you know we actually take a look at the the economic um you know intent of of what's going on whether it's a di5 thing or an nft or any any type of digital asset and the most important thing that we do is that we kind of put it in a way that accountants and financial professionals can understand so Rebecca I thinking on like financial statements U one of our big outputs is a balance sheet so that accountants and I think one of the earlier panelists said something about like I don't want to understand how an internal combustion engine works to drive my car accountants don't want to do this either they don't want to understand they don't want to be blockchain Engineers right I'm sure let Rebecca a find if she wants to become a blockchain engineer but they just want to have something that they can understand to help their clients you know and they build by the hour usually right so like if you spend less time it's going to be more advantageous to the client the large part what we do is take like what is really squirly data you know from the blockchain and other sources and put it in a way that's understandable by by accountants and what is you know generally viewed as accounting standard type of formats wow very nice wow so so let's see it so a since you seem like you were on a roll I'm going to ask you another question too okay so what type of data is needed to perform accounting on blockchain Reg relateded assets yeah I think I hit it my that's great duvail because I think I HTE it in my last response is that you like if you're going to rely exclusively on block on the blockchain you're going to you're going to come up with disappointing results you know um and you know trust me like if if if you're just like you know buying and selling Bitcoin on coinbase yeah you you're probably going to be fine you can probably use what you need on coinbase no problem but once you start straying into other things and a lot of things on defi um you know and and certainly um in in in in other protocols you know you're going to need something like a little bit more robust so that's where like you know unless you really want to go into and read every white paper for all the you know of of every protocol and and trust me those white papers aren't what they used to be um but like you really kind of have to understand what's actually happening you know W with each with with each transaction with each token so um that's a large part of what we do um so that like a lot of people the financial professionals that service people that deal with this stuff so you don't have to yeah I mean a little experience that I had with a student project team was that I mean we were working with an iot device and we want to put it you know put it on chain and it was figuring out what do you put on chain what do you what do you don't do you use a file system do ipfs you know FS um it was just so challenging on what tools and how do you do it and what and getting what type of data was such a critical conversation to figure that out properly yeah I mean we're usually like usually either one person or one person away from talking to someone who who does something in digital assets or crypto like oh yeah when I had to do my taxes or do something I was stuck you know and then that they usually have they understand like what our value proposition is awesome thank you Aid so I'm going to go back for you Rebecca okay so what when should companies begin accounting digital asset activity is there a certain like key point that they should be looking for I would say just immediately I mean I think the attitude is often you know we don't have the complexity yet or the volume yet to really warrant the investment in um you know a complex Erp or or GL system um and you know the ancillary apps that come with it or that need to come with it um to to really make uh a streamline and efficient process um and that might be true to some extent that you can get by with that at the beginning but you really want to you know before you have that volume and complexity set yourself up for Success so that um you know as as things ramp up you're really in a position to move forward and not be scrambling to get get those processes and tools in place um when it's pretty much you know too late I mean I think living in an Excel World or trying to live off of the the data that's on the blockchain um is doable but I mean I think your your tax professional doesn't want your Excel sheet um they want an organized and and accurate trial balance that that came from you know a an an accounting system I think um you know not living in that world you are very you know the the human error uh risk is is high when you're trying to translate transaction all data um you know on your own and so I I think I can't stress enough the the earlier the better um I think getting again back to kind of getting that right team in place to be able to utilize the tools and there are so many tools out there um that you really just need to to invest the time to find the right ones for you and the right ones that work well together um to be able to just have a a very efficient and streamlined accounting process so like Mom told always told us right early the better right okay works everywhere it does it do those Moms new moms moms they all they they know what's going on yeah so kuami we're we're going to go to you now so so let's see so so so you this is going to be a question that everyone wants to hear because it's so everyone's talking about it is there relationship between the fed's policy rate and crypto lending rates so the you know as my predecessors here on the stage earlier talked about decentralized Finance decentralized assets you know being cryptos one would expect that crypto assets or defy assets would be um insensitive to um changes you know in typical monetary policy now you know the typical Central Bank interest rate is more responsive to risk wearing um cryptos you know lending on a crypto platform is determined deted more by supply and demand so you know it's intriguing to to try to understand is there a relationship given the decentralized nature of cryptos now looking at both of them and you know Examining The Lending rates what you know recently you know I've looked at a number of crypto lending rates which includes a one of the um you know primary lending mechanisms and what I have found is that you know there's seems to be a very strong correlation with you know our current fed rates and the FED um policy rate changes which started about you know a year ago we're noticing that it it has been impacting the Ling rates on these platforms now it you know it it's it's it's hard to say exactly um you know what is some of the driv that is causing that at this early stage because cryptos came up about came about most cryptos came about um after 2008 as a response to um the 2008 crisis and they have actually um witnessed um a period of um rting increases like we're seeing now right we have been in a bull market environment for a number of years so this is one of the first real test that we can really um you know stress test these assets and see how they they respond and you know again as I said you know we could see a shift in in in policy rates have caused um a decline in lending rates on the the crypto platforms so does this influence the lending in the def5 market I think it does um influence it um again you know it would be meaningful to see you know you know to to better understand the causes um you know this is this is early on and I'm I'm looking at some of those um root causes right along with that but if that's the case um I I I think it will most definitely thank you clami yeah so I'm going to go to you Rebecca so you don't have to give names to your clients but what are the common the what are the common accounting mistakes pitfalls that you see with your clients um I would say the biggest one I see is just being very reactive instead of proactive um I think kind of common theme among my answers today has been really um you know getting yourself organized early on so that you're able to have that data and insightful information um at your fingertips to help you plan for the future future so as you think of your goals for the next few months the next few years you really need to plan in order to get there and and Achieve those goals and I think in order to do that you need to have um you know again usable financial statements and financial data metrics and insightful um you know pieces of information that are going to help you make decisions and inform decisions um to help you kind of look to the Future and not always be playing catchup and looking towards the past just to understand what happened all already um so that way you can really use data to plan for the future look to the Future and and be proactive rather than so reactive wow and you don't want to tell us your client that does this no okay well we'll keep you you can just whisper it into the mic so okay a we got you up coming up now so let's see here so what will the future entail for the needs requirements for the accounting of blockchainbased assets thank you um you know I think um there was I think Justin earlier from blockchain advisor is wearing a t-shirt and on the back it says the future is tokenization you know a big part of where we believe and I think a lot of us believe and you know I think it'll be a feature of this this U blockchain week for the couple days is like where we go next and you know tokenization as uh as Rebecca and I alluded to earlier without the infrastructure is um is going to go off the rails so we I think we have to solve for these basics of of how to deal with the financial and economic you know output of what it means to tokenize things whether you're going to buy and sell municipal bonds that's going to be I think a topic tomorrow right um there clearly an economic impact there so don't just assume that you know the typical bond um infrastructure translates to blockchain like that you get to you get you get an instrument for it so I think that's what we got to have to be like I think companies like node 40 and you know we're not the only ones we're we're definitely solving for some of these Storia issues about how to deal with the economics of All Digital asset activity you know and so that we have to be already thinking ahead that like you know the next step in tokenization is dealing with the infrastructure not just on the economics but compliance regulatory risk management too to make sure that super high way is going to really be the thing that supports what I believe in the next 20 20 years is going to Define how we live and conduct and conduct transactions among ourselves for pretty much everything wow oh thank you for that Aiden so now we get we're getting close to the end but let's let's do some wrap up now so I'm I'm going to go back to you Aiden right so so for this audience from your perspective what are the in three words I'll give you four maybe if you're good right do you want them when they leave this this place to remember from this talk and after that you got 15 seconds to shamelessly plug anything you want about you your company an event whatever it is um I I would say I don't if it's three words but don't assume infrastructure is the key thing I would say in part here is just I and I'm sure this is whatever Back alluded to earlier you just like we have seen it I'm sure wolf has seen it too just like there's just too any like false assumptions being made that things are there like don't make that same assumption yourself and whether you're embarking on a new project or what have you uh Shameless plug you know I I I I'm a I'm a big fan of of some of the local charities I guess a pan Mass challenge which recently happened so I'm going to I'm going to go off grid here and say like I'm a big suppor of the work they do I don't know how it all impacts with this new hospital switch with the Dana Farber uh connection but uh I still believe it's a worthwhile charity and there's still if you knew of any Riders I'd encourage you to support them you can still donate till the end of the month I believe so and then so please uh you obviously do it I don't uh my brother-in-law did it um and I knew knew some several others so but uh I love that charity it's like it's amazing how I think no it's it's it's it's got a national reputation now right and it's um and it I don't think it's we even realize it locally how really widespread huge yeah I got a lot of buddies that do it I don't it's getting up there with the marathon he of the Charles you know in terms of a you know total International understanding of absolutely wow so quam I'm going to go to you too from wrap up what are your three maybe four words you want them to part with and what do you shamelessly plug for you or or for whatever event you're you're thinking of so I just want to say that um as an asset class as an emerging asset class I think cryptos are here to stay right um what we find is that the data shows that it's it's it's basically taking route with genz who find it interesting and they drove it during the coid period right and I don't think um for that group of investors um you know cryptos are going to go anywhere right now sustainable investing is also something that I believe will take shape and form over the next couple of years because um today's investors are asking for more accountability to the environment right so what we'll find is that these are two things that we'll see take shape and take hold in in the coming years wow that's a lot of that's you said a lot three to four words you did a great job wow now what do you want to shamelessly plug well you know we're continuing this this conversation because this is a great conversation I heard earlier when I when I walked in that um you know as we develop the our talks around cryptocurrencies fintech right sustainability um this conversation needs to continue so people can um learn more right because a lot of people don't understand what are cryptos we talk about the environment and so forth well in my work we're continuing this conversation you know we're having a conference on F coming up in a couple day weeks um at at WPI October 19th through 20th where we will continue this very same conversation and our hope is to engage the community so people understand much more highly recommend that conference come up to WPI check it out industry is going to be there Academia it's going to be crazy I'm telling you come on up Rebecca you're up now okay let's see if you can do as well as quami with said a lot in three to four words let's see if you can do as well and what do you shamelessly want to plug you have your event this is by the way all the drinks or on Rebecca just just say you know Rebecca right you can plug that or anything else you want yeah uh my three words are Implement technology ASAP so um look at this she's the only one who's stuck to the rules thank you okay nice yeah I mean I I think my PL is yes we are having the event directly afterwards um but also wolf does have crypto and um you know digital assets Specialists across all lines of service so if you do find yourself in need of help in the accounting area um just can go to our website wolfen co.com um and just uh take a look and see we have a lot of service offerings so and thank you so much Rebecca so yeah and now I can see we're running out of time the count the clock's coming down oh you want a question I'm sorry about that go ahead bring it in all right so I'm in the advertising space right so what I'm curious about is how are companies claiming the value uh of crypto so like when is it a taxable event essentially if they bring it in from Fiat to crypto let's say like I brought in 10 grand right let's say I bought a bunch of nfts and those nfts could go up in value or down in value and then same thing with those crypto like how are we accounting for that do I not need to worry about that until I actually take it back to Fiat or is it like you know these if I bought if I minted a bunch of apes and now they're all worth hundreds of thousands of dollars is that something I need to have on a balance sheet somewhere yeah I mean I think every exchange is considered a taxable event um you don't have to wait till it goes back to Fiat it's um and you don't have to be selling something so any anything in exchange for something else is considered a taxable event and so that I think um needs to be reflected on the financials as such so it it gets a little hairy I think sometimes espe with the value yeah right yep great usually the way we approach is like if it's a disposition of the asset so same thing like if you sell it exchange it for something else in the case of nfts it gets really gar really fast especially if you initiated that nft or if you took it and added value to it right so there's all sorts of quirkiness to there and that's where you know you're definitely starting to get into like a very opaque territory and this is where the rules aren't really spelled out and that's why we what we do is like we we provide the data so a firm like wolf can come up with the right point of view on behalf of you as their client to say like okay this is what you should how you should treat this tax-wise accounting wise or if you're using them for audit from an audit perspective you get you hit exactly the use case it's snarly we get another question right here yeah uh this is for is it Aiden yeah Ben right yes hi hi um you described your firm as uh pal anderes yes um so assuming you know you're doing a lot of Big Data stuff and I'm wondering uh I'm thinking about the recent events with chainalysis and how in the courtroom I I forget who exactly on staff analysis said basically we don't have rates of false positives or rates of false negatives for the services and Analysis we provide I'm wondering has node 40 run into anything like that or or how is how are you handling that sort of yeah so we we I mean we often put ourselves like in the same kind of cohort as like a chainalysis elliptic trm a lot of those players right and where those guys are really looking at like tracking of assets they don't get into the economics or Finance aspects of what's going on with with that activity that's where we come in so chainalysis stays out of our lane we stay out of theirs um I think it's someone from one of those three said it recently we can tell you what to do and node 40 can tell you was it worth it hopefully that helps clarify the world but you are right it's huge data after our pay rooll our biggest expenses our AWS bills so we you know it's a lot of data it's serious business um prepare to pay a AWS if you want to get into this business or your cloud [Music] provider