Bridging Traditional Accounting with Web3 Treasury Management

In a recent episode of The Financial Frontier podcast, host Patrick Camuso sat down with Sam Weikman, blockchain practice leader at Propeller Industries and founder of the SODA initiative, to discuss the future of crypto accounting and financial reporting standards. The conversation revealed crucial insights into how the industry is tackling one of its biggest challenges: standardizing digital asset accounting.

The Origins of SODA

SODA (Supplementary On-chain Digital Asset) reporting emerged from a practical need at Propeller Industries while working with their first major crypto client, Solana Labs. The traditional accounting approach of reporting digital assets at the lower of cost or impaired value on balance sheets wasn’t providing the transparency and utility that operators needed.

“We needed to show our work,” Weikman explained, describing how the disconnect between weekly treasury reports and traditional GAAP financial statements led to the development of SODA. What started as an internal solution to bridge US GAAP balance sheet reporting with operational treasury management has evolved into an open-source industry standard.

Why SODA Matters

The current landscape of digital asset accounting presents several challenges:

1. Multiple Valuation Methods: Within a single “digital assets” line item, companies might have:
   • Tokens valued at fair value
   • Tokens valued at the lower of cost or impaired value
   • Stablecoins requiring different treatment
2. Real-World Asset (RWA) Tokenization: As more traditional assets become tokenized, digital representations of assets could appear across multiple areas of the balance sheet.
3. Operational Visibility: Traditional financial statements don’t provide the granular wallet-level insights that Web3 operators need for effective treasury management.

Key Features and Benefits

SODA functions as a supplementary financial statement, providing:

• Clear visibility into liquidity positions
• Detailed wallet-level reporting
• Bridge between GAAP requirements and operational needs
• Standardized approach to digital asset reporting
• Support for tax planning and compliance
• Enhanced transparency for stakeholders

Industry Adoption

The initiative has gained significant traction, with major players in the space implementing SODA:

• BitWave has integrated SODA reporting
• Crypto.com is rolling out SODA capabilities
• Verbal commitments from Integral, Trace, and CryptoWorth
• Support from Big Four accounting firms
• Endorsements from leading venture capital firms

The Future of SODA

The initiative continues to evolve, with several key developments on the horizon:

1. SODA Roll Forward: Similar to a cash flow statement but for token movements, helping track changes in token balances across periods.
2. Wallet Hygiene Standards: Development of best practices for wallet infrastructure and management, similar to a traditional chart of accounts.
3. Enhanced Reporting Categories: Working to better represent different types of digital assets on balance sheets rather than grouping them into a single line item.

Broader Industry Implications

Weikman believes that within five years, most companies will have some exposure to blockchain technology, whether through payments, inventory tracking, or supply chain management. This makes standardized accounting practices crucial for mainstream adoption.

“If you can’t account for it, you’re not going to transact with it,” Weikman emphasized, highlighting how SODA could help traditional CFOs become more comfortable with digital assets on their balance sheets.

Getting Started in Crypto Accounting

For finance professionals looking to enter the space, Weikman offers practical advice:

1. Hands-on Experience: Start by creating a MetaMask wallet and experimenting with different transaction types (swapping, lending, borrowing, NFTs).
2. Network with Industry Professionals: The crypto accounting community is collaborative and willing to help newcomers learn.
3. Study the SODA White Paper: Available at soda.finance.xyz, it provides a comprehensive overview of digital asset accounting best practices.

Looking Ahead

As the industry matures, SODA represents a crucial step toward standardization. The initiative’s open-source, collaborative nature aligns with crypto’s core values while addressing a critical need in the financial infrastructure.

The next SODA symposium is planned for Q2 2025 in San Francisco, bringing together industry leaders to further develop these standards and share best practices. As more companies adopt blockchain technology, initiatives like SODA will be essential in bridging the gap between traditional finance and the emerging digital asset ecosystem.

For finance professionals and companies looking to implement better digital asset accounting practices, the SODA white paper and community resources are available at soda.finance.xyz.