• Jan 14, 2020
The Protocol Newsletter is an inside examination of the accomplishments within the digital securities industry. The Protocol Newsletter features issuers, issuance platforms, marketplaces, broker-dealers, custodians, marketers, and more, with a specific interest in their real-life stories about what it takes to issue and manage digital securities on public and permission-based blockchains. Our goal is to provide the digital securities industry with invaluable insights and to serve as a resource for those looking to issue digital securities in the future.
1. For those who may not know, what is Armanino?
We are a business consulting and public accounting firm. We are the largest CPA firm headquartered out of California. We have a Blockchain Practice that works with many of the most well-known exchanges, issuers, startups and investors in the blockchain and crypto industry.
2. What excites you most on a personal level about working in the blockchain space?
I get excited about how this technology can improve trust and transparency; and what this enables in the investor reporting and audit space. I’ll give you an example: We recently launched the world’s first real-time audit solution (TrustExplorer), built on blockchain technology. It is the first real-world step in a move to deploy real-time auditing, backed by immutable trust, in any engagement. Instead of relying on “point-in-time” reports that are stale as soon as they are distributed, real-time audits will ensure information is always current and relevant to the public. We are currently using this technology in the stablecoin space, and are exploring its use case in the security tokens space. Real-time audit will take asset performance transparency to a whole different level. This will foster healthy secondary markets in the security token space. I am very excited about building this in 2020.
3. How and when did Armanino begin to focus on security tokens?
We did the tax structuring work on one of the first deals back in 2017. In 2018 we did the first audit engagement over a token issuer. Since that we have worked on a variety of deal structures (Reg D filers, Reg A+, Reg S) in tax structuring, compliance, advisory, financial consulting and audit capacities.
4. Can you share any security token projects that Armanino is currently working on?
There are a few advisory projects I can’t talk about. I am excited to be working with Securitize on the international tax management automation for issuers.
5. Can you describe the difference between using blockchain technology for crypto vs security tokens?
I think they are cousins. They share some DNA around seamless value transfer. They differ in that we don’t want security tokens to be uncensorable.
6. Can you describe what triple-entry accounting is and its potential impact on the accounting world?
It’s the idea that for every accounting entry (a debit and a credit), you also include an entry in an immutable digital ledger, resulting in a single version of the truth for all accounting transactions.
7. What aspects of security tokens from an accounting perspective can eliminate the traditional pain points of managing securities for companies?
Cap table management. This is a real burden that we can fully automate with security tokens. Same with tracking income distributions like dividend payments. The next step is automated tax compliance on these transactions.
8. Do you have an opinion on the pace of adoption of blockchain technologies in accounting?
Unfortunately, it is fairly slow. Most CPA’s are worried about how to account for and audit blockchain transactions. A better approach is to rethink the possibilities the technology enables (real-time, automated and secure)
9. At what point would a company be wise to seek the services of a company like Armanino, and do you ever recommend that companies use blockchain technologies like security tokens?
We work with issuers on their tax structuring, tax compliance, accounting & reporting, audit and review work. Through our dedicated Blockchain team we also offer new solutions that are specifically enabled through blockchain, like real-time audit or investor reporting (see TrustExplorer above).
10. How do private companies typically manage the secondary market trading of their securities? How will security tokens change this?
In many secondary markets, there are liquidity discounts, settlement is expensive and takes time. There may also be lockups to ensure tax and regulatory compliance management. Digital securities can eliminate or at least reduce all those burdens.
11. If security tokens are the natively digital future of all securities and in a “when, not if,” situation, then in your opinion how far out is the tipping point for broad adoption?
For it to go mainstream: 3 to 5 years. I expect to see “killer use cases” in specific asset classes in the coming 24 months.
About Armanino LLP
Armanino LLP is a Top 25 CPA & Consulting firm in the nation, one of the "Best of the Best" accounting firms and a Best Places to Work, both nationally and regionally. We have a strong commitment to our communities and are a Green Certified business.
Armanino brings depth, expertise and value to its clients. We strive to be unique in the market by providing on-site partner involvement and deep industry expertise with a regional perspective for both private and public companies. We offer a high personal level of attention to our clients and strive to communicate on your business needs and provide proactive counsel throughout the year.
We are perfectly positioned to provide services to companies that are looking for an alternative to national or "Big Four" firms or outgrowing their local CPA. We have three departments consisting of Audit, Tax and Consulting that provide a complete array of traditional and non-traditional services.
To learn more, please visit https://www.armaninollp.com/.
Securitize delivers trusted global solutions for creating compliant digital securities. The Securitize compliance platform and protocol provide a proven, full-stack solution for issuing and managing digital securities (security tokens). Securitize’s innovative DS Protocol has the highest adoption rate in the industry and enables seamless, fully compliant trading across multiple markets simultaneously. Multiple Securitize powered digital securities are already trading globally on public marketplaces with many more in the pipeline.
To learn more, please visit our website.