Regulatory compliance: segregation of corporate and customer funds | Cryptio Bedrock

Crypto enterprises can meet complex regulatory requirements with Cryptio Bedrock’s compliance stack.

From month-end close and audit preparation to securing licenses, Cryptio Bedrock is the industry standard when it comes to supporting exchanges, banks, stablecoin issuers, payment solutions, and asset managers to navigate complex compliance requirements. Our customizable tools address even the most intricate edge cases, ensuring you stay ahead of global regulations.

Cryptio Bedrock addresses regional regulatory requirements, some of which include

• Markets in Crypto-Assets (MiCA)
• Virtual Assets Regulatory Authority (VARA)
• Payment Services Act (PSA)
• Electronic Money Institution (EMI)
• Money Transmitter License (MTL)

Key compliance requirements for institutions:

• Segregation of funds - Mandated by Global regulatory frameworks like MiCA, VARA, and Singapore’s PSA to ensure client funds remain separate from operational assets, to protect against insolvency, mismanagement, and compliance risks.
• Fair Market Value (FMV) - Crypto-assets be valued at FMV for financial disclosures, client asset reporting, and balance sheet recognition. These vary by jurisdiction and depend on applicable accounting standards such as IFRS or GAAP).
• Detailed transaction records for regulatory oversight which require periodic reporting of balances and transaction records, covered in the crypto reporting section.
• Daily reconciliation obligations to ensure customer assets are accurately recorded and segregated. Check out our Reconciliation blog to learn more.

Segregation of co-mingled funds: corporate vs customer

Custody architectures are typically not designed with back-office teams in mind within large enterprises such as exchanges, banks, payment providers, or stablecoin issuers. As such, operational wallet infrastructures often lack future-proofing and regulatory compliance.

Regulations like those previously mentioned require corporations to demonstrate financial control over customer transactions, ensuring they are properly segregated from corporate transactions and maintaining distinct asset inventories.

Cryptio Bedrock provides a plug-and-play compliance stack that empowers back- and middle-office teams to reverse-engineer co-mingled fund infrastructures. It enables:

• Inventory cost basis calculation by purpose (e.g., revenue stream).
• Accurate asset pricing and valuation at fair market value (FMV), assessing asset scope, impairment versus cost, and applying revaluations as required for balance sheet reporting.
• Precise regulatory reporting for local and global requirements, including license applications.

Multi-inventory system to ensure accurate cost basis application for funds

Segregation of funds is achieved through Bedrock’s multi-inventory system, which simplifies the management of omnibus infrastructures for customer funds and corporate balances.

Consider a typical exchange account that not only custodies assets but also receives staking rewards and mining rewards. When it comes time to dispose of assets from the rewards or mining revenue streams, it is crucial to ensure that these transactions do not impact the assets held for custody, even if they are the same type of asset, such as Bitcoin (BTC). This nuanced approach is essential to maintain accurate accounting records and comply with regulatory standards.

Cryptio Bedrock can automatically segregate assets within each wallet, categorizing them by source and purpose. This is not possible manually at scale. The system ensures compliance, and gives you a clearer view of your financial operations. Users can define labels for inflows and outflows and apply various cost-basis methodologies — 1 to 1 cost basis, trade-level, specID —to each queue. This streamlined system ensures inventory segregation by lot, source, and purpose, making it easier to manage co-mingled assets while meeting regulatory expectations. But compliance doesn’t stop here—let’s look at how Cryptio Bedrock streamlines asset valuation to meet reporting requirements.

Asset revaluation adjustments for accurate regulatory reporting

Complying with multiple accounting standards can complicate the categorization, valuation, and reporting of assets and transactions. Stakeholders—including tax authorities, investors, and auditors—require specific metrics such as fair value measurements, realized and unrealized gains, or risk disclosures. Moreover, all the regulatory framework above requires fair value reporting.

Cryptio Bedrock’s new revaluation module simplifies FMV adjustments and impairment testing in one interface, offering tailored adjustments per asset and wallet. This feature is especially valuable for:

• Companies holding a mix of digital assets, distinguishing between assets subject to FMV and those requiring impairment testing will be crucial for accurate financial reporting.
• The change in accounting standards will also impact tax reporting, as the recognition of gains and losses under FMV can lead to different tax implications compared to impairment accounting.

These adjustments seamlessly integrate with the platform’s advanced Chart of Accounts (CoA) module, which introduces multi-level CoA mapping. This allows users to create multiple journal entries for a single transaction, a critical feature for enterprises with complex accounting structures that require mapping to both ERP and manual accounts.

Crypto reporting and licenses application support for global compliance

Enterprises operating across multiple jurisdictions face challenges in meeting varying reporting requirements. They must navigate differing regulatory standards, tax laws, and accounting practices (e.g., IFRS vs. GAAP), which often change and require ongoing updates to compliance processes. A streamlined, flexible reporting system is essential to ensure compliance while minimizing inefficiencies.

Cryptio Bedrock’s reporting tools ensure compliance with minimal friction, empowering enterprises to meet evolving regulatory requirements confidently. It not only provides the tools for reconciliation and scalable infrastructure, but also supports fund segregation and license applications for frameworks like MiCA, MTL, VARA, and PSA. Its customizable reporting solutions ensure that:

• Transactions and holdings meet local and global regulatory standards.
• Reports include client-specific metadata (e.g., trade IDs) for jurisdictional compliance.

The Statement of Digital Assets (SoDA) report simplifies balance compliance reporting for the Money Transmitter License (MTL) by aligning layouts with regulatory expectations. Combined with the new Asset Reporting Framework (ARF), these reports integrate wallet and asset grouping data, making it easy to categorize assets from product to reporting. This streamlined approach is essential for navigating complex regulations like MiCA, whether for MiCA-regulated assets or other classifications.

Is Cryptio Bedrock right for you as you prepare for your licensing?

If your enterprise is looking for license application support or looking to complete its crypto audit, book a free demo today. Trusted by over 450 enterprises, Cryptio Bedrock is designed to support a wide range of regulated crypto use cases with robust back-office processes.

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Cryptio Bedrock is the chosen financial data platform for regulated enterprises’ financial reporting, operations, and compliance needs. Explore how Bedrock can transform your financial integrity and scalability today.