SAB 121 requires disclosures in the footnotes and elsewhere in the filing to address the nature and amount of crypto assets the reporting entity is responsible for safeguarding for its platform users. The disclosures should be disaggregated to disclose each significant crypto asset, including any vulnerability due to concentrations in accordance with ASC 275-10-50. See FSP 24.3.4 for additional information.

In accordance with ASC 235-10-50, the accounting for the crypto asset safeguarding liability and corresponding asset should also be described in the footnotes to the financial statements. See FSP 1.1.4 for additional information.

The reporting entity should also consider disclosure of which party is responsible for recordkeeping and safeguarding the crypto assets, as well as the entity that holds the cryptographic key information. Such entities may include the reporting entity, its agent, or another third party depending on the custodial arrangements.

It depends. We believe the nature of the relationship between the customer and the reporting entity is generally such that the customer has the ability to request withdrawal of the crypto assets and thus terminate the crypto asset safeguarding liability at any time. Accordingly, we believe this on-demand, short-term nature requires the reporting entity to classify both the safeguarding liability and corresponding asset as current on its balance sheet. This is consistent with the guidance on presenting a classified balance sheet in ASC 210. See FSP 2.3.4 for additional information.

The crypto asset safeguarding liability and corresponding asset are measured at each reporting date at the fair value of the crypto asset that the reporting entity is responsible for safeguarding for its customers. We believe the changes in the fair value of the safeguarding liability and corresponding asset can be presented in the same line item in the income statement. Generally, we believe the changes in the fair value of the safeguarding liability and corresponding asset will net to zero, unless there is a hack or other event that affects the fair value of the corresponding asset.

Given that the crypto asset safeguarding liability and corresponding asset are measured at the fair value of the crypto assets safeguarded by the reporting entity for its customers and remeasured to fair value each reporting period, reporting entities will also need to include the disclosures required by ASC 820.

ASC 820, establishes a framework for determining fair value. Fair values are divided into a three-level fair value hierarchy in accordance with ASC 820-10-35-37. Level 1 is the highest level of the fair value hierarchy and is based on observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. However, while there may be quoted prices in active markets for certain underlying crypto assets, no such markets exist for the safeguarding liability and corresponding asset (which are separate from the underlying crypto assets). Accordingly, we believe the fair value measurement of the crypto asset safeguarding liability and corresponding asset should not be classified within Level 1 given they are measured indirectly using the fair value of the underlying crypto assets being safeguarded for customers. Generally, we believe the fair value measurement of the safeguarding liability and corresponding asset would be classified within Level 2 unless they are measured using unobservable inputs (in which case, they would be classified within Level 3). See CA 4.1 for additional information on the fair value hierarchy.