Bookkeeping for the Multi-Collateral DAI Upgrade
If you’re reading this you’re likely already aware that MakerDAO is releasing a new issuance mechanism for stablecoins. With this release you’ll now be able to collateralize assets other than ETH to issue a stablecoin. MakerDAO has released lots of documentation with regards to the upgrade so if you would like to learn more about it technically, this is a good starting spot.
By way of very brief overview, single-collateral DAI will now be called SAI. All further references to single-collateral DAI in this post will be called SAI.
Multi-collateral DAI will take the name of DAI. All further references to this asset will be called DAI.
Adjusting Bookkeeping Entries
While the name swap may seem simple enough, it lends itself to a bit of extra bookkeeping. The implementation of multi-collateral DAI is starting today, November 18th. It will take exchanges, lending applications, price feeds and other DeFi products some time to complete the upgrade. This means that your books might contain different naming conventions for the same assets for some time. Here are some steps you can take to mitigate confusion and ensure compliance:
- Portfolio Management: Consider swapping SAI for DAI and opening different Collateralized Debt Positions
Many exchanges will not support SAI. This means you should evaluate where you trade and potentially consider migrating to DAI. Instructions on how to do this can be found here. Additional instructions can also be found in that link about migrating SAI CDPs. If you’re concerned about properly reflecting CDPs in your financial records, please check out my earlier blog post, DAO Accounting, and skip to the Financial Products Focused DAOs section. It might be prudent to consider migrating your SAI now as it will be discontinued at some undetermined point in the future by a vote of the MakerDAO governance process.
If you do decide to move from SAI to DAI, there is an option to activate a DAI savings rate. Should you decide to move forward with this, please note you will need to make sure to track the interest earned from this asset.
2. Update Historical Financial Records
Your financial history should also be changed to reflect the name shift. This means you may need to manually update your past records to reflect SAI as the correct asset name. If you are a VeriLedger customer we will update this history for you.
For the month end financial close of November, not all exchanges are scheduled to have made the name changes. If you have lots of SAI transactions for the month, you might want to consider delaying your reconciliation until the services you use have completed their upgrades. If for some reason a platform you are using has not updated its naming, you’ll need to make manual adjustments to your records to create uniformity.
3. Footnote Your Balance Sheet
If you are planning to be audited in the future as all businesses should, think about adding a footnote to your 2019 Balance Sheet explaining the change in asset name. If you are a VeriLedger customer and hold SAI, we will be populating your Balance Sheet report to reflect this footnote by the end of the year. We will also take care of revising your financial history and updating your portfolio in a uniform way once all of our integrated services (exchanges and price feeds) have completed the upgrade. We are also adding native support for DAI to our system.
Tax Considerations
As long as SAI and DAI both keep their pegged values to $1, there are not really taxable implications for a simple SAI to DAI swap. In the event that the peg breaks, I’ll update this section with tax instructions.
Conclusion
The release of multi-collateral DAI is an interesting new frontier in the DeFi space. In order to help make it a success, VeriLedger’s goal is to make sure that the G.A.A.P. and I.F.R.S. implications of such innovation don’t cause entrepreneurs added stress. If you have any additional questions, we’re always happy to talk.
