Crossing Our Desk:
-When the BitLicense came out last month and many bitcoin startups moaned about the innovation-killing new compliance burdens from New York's Department of Financial Services, the team at Ribbit.me celebrated.
Retail rewards points - frequently flyer miles, hotel loyalty points, return-customer retailer programs and so forth - that make use of cryptocurrencies or their underlying blockchain technology were exempted from the regulations. For Ribbit.me, whose RibbitRewards are tradeable, blockchain-based loyalty tokens, that was good news.
But even if regulators ignore "crypto-reward" tokens, accountants could have a hard time with them. That's because, under one Ribbit.me model, founders Sean Dennis and Greg Simon claim to effectively make disappear the loyalty program liabilities that merchants have traditionally had to carry to recognize their future obligation to deliver goods and services against those points.
With a viewpoint that upends the centuries-old principles of double-entry bookkeeping, Messrs.
Dennis and Simon argue that if reward points are generated by an algorithm and issued in the form of a digital token on the blockchain, it creates an asset for the individual holder but the countervailing liability resides with the entire blockchain itself.
That means "there's no liability on merchants' balance sheets anymore...and that's what's huge," says Mr. Dennis. "We can take millions of dollars in liabilities off their balance sheets."
As Mr. Simon concedes, this kind of thing could blow a bookkeeper's mind. "We tell them the liability disappears, because the blockchain belongs to no one," he says.