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Corporate Actions & Crypto Assets

#crypto #bitcoin


Given their importance in public markets, there are well-established industry standards and market conventions associated with processing Corporate Actions. Indeed, stock exchanges publish specialist information services dedicated to the dissemination of these announcements.

The key participants in Corporate Actions, apart from the issuers themselves, are Share Registers, Fund Trustees, Custodians, Payment Agents, and Brokers. Between them, these intermediaries are responsible for tasks such as paying and distributing dividends; updating shareholdings from the allocation of preference shares, stock splits, and mergers; and processing shareholder votes on any corporate events that require their approval.

By comparison, crypto is still a relatively young asset class, at barely 10 years old, and is growing up in public, and fast. This is probably the first example of an asset class that was retail first, in terms of taking a distributed/decentralized and bottom-up approach to issuance. This also applies to the evolution of industry standards and conventions in crypto markets.

Over the past 6 years, Brave New Coin has invested significant resources and effort into developing institutional-grade data infrastructure for tracking the market performance of hundreds of crypto assets. This involves constant and consistent processes for data research, capture, standardization, and analysis.

Whether we are tracking on and off-chain data including exchange, supply, wallet, trading volumes, news, social, and sentiment, it requires a process of triangulation to cross-reference and reconcile different sources. For example, no two crypto exchanges use exactly the same API data end-point configurations.

That said, the combination of our Taxonomy, our aggregated Market Data Engine, our real-time Newsfeed plus on-chain analytics means we can provide a 360-degree view of the life-cycle of each crypto asset we track.

  • The Taxonomy is a database of unique identifiers, ticker symbols, reference data, descriptive data, and technical attributes.
  • The Market Data Engine provides intraday and End-of-Day prices on over 1500 assets, covering 200+ exchanges, and 6500+ markets, stretching back to 2014.
  • The Newsfeed provides structured in near real-time.

Corporate Actions in the context of crypto assets

The most visible Corporate Action in the crypto industry is the Hard Fork, which is analogous to either a traditional Demerger or Stock Split. If holders of Asset A are able to receive a comparable number of Asset B as the result of a fork, this is akin to Demerger where equity is split into 2 different securities. Alternatively, a 2:1 stock split arising from an increase in the outstanding share issuance would also benefit an original holder. While neither scenario is entirely equivalent to a Hard Fork, they are comparable.

Second, airdrops or other on-market token issuance could be regarded as a form of Corporate Action, in that new assets are issued to existing wallet holders. Again, these scenarios are unique to crypto, and not necessarily consistent with traditional equity or debt markets.

Third, token burns could be regarded as a form of share buy-back or redemption, depending on the specific mechanics, and on how value is rescinded or transferred as a result of the change in supply.

Fourth, any new exchange listing or delisting of a token would constitute a form of Corporate Action, as it may mean an increase or decrease in market liquidity, and therefore price activity.

Finally, a change in the token name or its ticker codes would also be considered a Corporate Action, as data systems would need to be updated accordingly.

Why do Crypto Corporate Actions matter?

Just as there are no industry standards for crypto identifiers, there is no standard for Corporate Action events. Each crypto exchange has its own process for market announcements on new listings or delistings, managing account suspensions, and the treatment of hard forks.

As mentioned above, crypto assets display a number of activities peculiar to this asset class, which can impact supply volumes, and therefore market cap and price. This is why Brave New Coin spends time tracking and calculating free-float or circulating supply, which is reflected in our pricing and market cap data. We also invest considerable effort in analyzing “fake” or non-verified trading volumes.

Understanding the impact of Corporate Actions in crypto markets is just as important as in traditional markets.

  • In the event of a listing or delisting event, it may mean some investors can no longer hold a token if the only listings are on unregulated exchanges or venues that operate outside the investor’s permitted jurisdiction.
  • In the event of a Hard Fork, if the “new” asset does not fall within a fund manager’s investment mandate or risk threshold, the fund may have to divest the forked tokens, and as an unwilling buyer, the fund may suffer a potential loss.
  • In the event of an airdrop, an investor may find they are overweight a particular asset sub-class, which unless they can rebalance their portfolio accordingly, may mean having to sell down the new asset.

Brave New Coin can help

In addition to our intraday and End-of-day pricing data, both point in time and historic, Brave New Coin maintains a record of every crypto asset we have been tracking, along with the date we started generating prices, and whether it is still an “active” asset. Of course, listing events and prices will vary from exchange to exchange. Unlike an IPO, crypto assets can list on multiple exchanges, and at different times and with different prices.

Currently, there are no industry standards such as CUSIP or ISIN for crypto assets and issuers. Instead, there are some market customs and industry practices. The closest is the use of common ticker symbols for each asset, but even these are self-defined. They aren’t issued by a central registrar and rely on a combination of “first come, first served” in claiming a specific ticker symbol, and market convention in agreeing to adopt or recognize the use of these symbols.

However, the BNC Taxonomy incorporates a unique identifier for each asset, market, and exchange. If there are any name or symbol changes, and often these are done unilaterally and without much notice or consultation, we can nevertheless provide a continuous data thread for each asset.

The BNC Pro Newsfeed can be used to track events such as listings, forks, and other activities. The Newsfeed can be filtered by Keyword, Sentiment, Asset, and Category.

Finally, for fund administrators, wealth managers, and financial planners who need to track multiple client holdings across different portfolios, exchanges, and markets, Brave New Coin has recently launched BNC Pro, an integrated portfolio management solution.

BNC Pro is designed to track client holdings via their exchange accounts, or from manually entered records and uploaded CSV records. As well as providing access to BNC real-time pricing, news and analytics, BNC Pro users can export reports for each portfolio, with the transaction date, amount, fees, and transaction type.

The Client Transaction Reports can be filtered by Portfolio, Asset, Exchange, and date range. Users can also assign custom tags and notes. Custom Transaction Reports can then be saved as templates and Exported as CSV or PDF files, ready for use by accountants and tax advisers.



OhNoCrypto

via https://www.ohnocrypto.com

Rory Manchee, Khareem Sudlow