8JULY 2021IN MYOPINIONBy Marisa Melliou, Group Audit Director, OPAPIn the post pandemic era, the commitment by governments and central banks to do whatever it takes has led in a global stimulus of more than $10T with central banks expanding money supply, leading to a parallel decrease in our spending power and money losing its meaning. While the global financial-economic system is measured in trillion dollars, the digital assets that were born in the last financial crisis grow fast due to their characteristics and approach the total value of1,7trillion dollars with approximately 9000 crypto currencies, exchanged in more than 500 virtual currency exchanges . Furthermore, last year the Decentralized Finance (DeFi ) space has grown rapidly giving high yields. The total value (TVL) locked in DeFi protocols grew over 2,500% in 2020, from around $700 million in January 2020 to over $20 billion in December 2020. The TVL represents the equity that investors are willing to commit to these protocols, which this year alone, more than doubled, reaching $40 billion in March 2021 .Several company examples indicate that digital assets have gathered investors' attention. For example, the 10b Stoneridge asset management institutional Investment Company allocated$100 million in bitcoin as primary reserve asset. In addition, Micro Strategy Inc. announced that it had made more than $1 billion in total bitcoin purchases in 2020, since it would "provide the opportunity for better returns and preserve the value of [their] capital over time compared to holding cash". The investment giant Fidelity is offering wealthier customers a Bitcoin index fund and Coinbase, one of the biggest centralized crypto-exchanges, is listed in Nasdaq. Investing in digital assets seems to be a unique opportunity and at the same timea significant challengefor CFOs, Treasurers, Risk Managers, Accountants and Auditors. Some critical factors that CFOs, Treasurers should consider before they invest in bitcoin or other digital assets, which the AC members should also challenge, are listed below What is the nature and classification of asset investment? The digital assets that have value and for which there is a lot of trading are not more than 30. Moreover, most of these assets fall into one of the following different categories: a) cryptocurrencies, b) platforms, c) utility tokens, d) security tokens, e) natural assets, f) recreational crypto libraries with collections of works of art or intellectual property rights, g) stable coins, and h) central based digital currencies, which are government-issued currencies. Today there is no commonly accepted international classification and even in the UK it has been modified in the last three years. EU via its recent MICA draft regulation,classify them based on their characteristics and useas investment tokens, payment/exchange/currency tokens, and utility tokens. Thus, company leaders need to be comfortable with the characteristics. the nature and the functions of the financial asset.In what type of capital increase implementation to participate in? Investment tokens provide rights similar to those of financial instruments (eg voting rights, dividends) and are issued as part of an increase capital implemented through an ICO (Initial Coin Offering), or STO (Security Token Offering) or IEO (Initial Exchange Offering) .It is important to take into account that eachtype of offering has its own risks, and that the treasurer, DECENTRALIZED FINANCE INVESTMENT OPPORTUNITIES AND CHALLENGES
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