SEC's Chief Accountant Discusses Financial Reporting for Initial Coin Offerings

by Blank Rome LLP

Blank Rome LLP

Corporate, M&A, and Securities

Action Item: The Securities and Exchange Commission’s (“Commission” or “SEC”) registration requirements apply to offers and sales of securities in the United States and include filing audited financial statements. In July 2017, the Commission issued an investigative report relating to blockchain tokens, clarifying that the federal securities laws may apply to those who offer and sell tokens through initial coin offerings (“ICOs”) in the United States. Digital tokens (also referred to as cryptocurrencies) are subject to the same financial reporting requirements as traditional securities when offered or sold on an exchange. In this alert, we have summarized certain accounting issues discussed in a speech by Wesley Bricker, the Commission’s Chief Accountant in his remarks before the AICPA National Conference on Banks & Savings Institutions, which highlighted the regulatory and financial reporting requirements relating to ICOs.

Financial Reporting Requirements

The federal securities laws apply to any issuer seeking to offer or sell securities in the United States regardless of whether the issuer is a traditional or virtual company, whether the securities are paid for with U.S. dollars or digital coins or tokens, or whether the securities are distributed through stock certificates or virtual ledger.

In other words, the offering and sale of digital tokens are subject to the same registration laws as typical securities. Under the Securities Act of 1933, unless an exemption applies, all securities being offered or sold must be registered with the SEC. Registrants must provide the SEC with essential facts, including: a description of the company’s properties and business; a description of the security to be offered for sale; information about the management of the company; and financial statements certified by independent accountants.

Mr. Bricker noted that SEC registration requirements require filing audited financial statements and suggested that organizations should consider both accounting and reporting guidance, like U.S. GAAP, when preparing related financial statements. Specifically, Mr. Bricker pointed out that SEC guidance on the matter focuses on “presentation and disclosure of financial statements, consolidation, translation, assets, liabilities, revenue, expenses, and ownership.” With that in mind, Mr. Bricker advises that issuers and holders of either traditional securities or virtual tokens consider the following:


  • The required financial statement filing requirements
  • Whether there are any liabilities requiring recognition or disclosure
  • Whether there are any previously recognized assets that should be “de-recognized”
  • Whether there are any revenues or expenses requiring recognition or deferral
  • Whether there are any transactions with owners which result in either debt or equity classification and possible compensation expense
  • Implications for the provision for income taxes


  • Whether specialized accounting guidance, like in the case of investment companies, applies to the presentation of the holder’s financial statement
  • The characteristics of the digital coin or token in considering whether, how, and at what value the potential transaction should affect the holder’s financial statements
  • The nature of the holder’s involvement in considering whether the issuer’s activities should be consolidated or accounted for under the equity method


Whether or not a particular transaction involves the offer and sale of a security will depend on facts and circumstances of the transaction. While not every digital token may be deemed a security, the facts and circumstances of each offering must be thoroughly analyzed. If a digital token is considered a security, then the offering is subject to SEC reporting obligations. An entity involved in ICOs should carefully consider potentially applicable SEC accounting, disclosure, and reporting guidance.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Blank Rome LLP | Attorney Advertising

Written by:

Blank Rome LLP

Blank Rome LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.