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Registered number: 11337627









BLOCKCHAIN ACCESS UK LTD









ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

 
BLOCKCHAIN ACCESS UK LTD
 
 
COMPANY INFORMATION


Directors
N Cary 
S P Smith (Resigned on 8 November 2022)
A Turnbull (Appointed on 1 November 2022)
 




Registered number
11337627



Registered office
Minshull House
67 Wellington Road North

Stockport

Cheshire

SK4 2LP




Independent auditors
BDO LLP

55 Baker Street

London

W1U 7EU





 
BLOCKCHAIN ACCESS UK LTD
 

CONTENTS



Page
Strategic Report
 
1 - 8
Directors' Report
 
9 - 14
Independent Auditors' Report
 
15 - 18
Statement of Comprehensive Income
 
19
Balance Sheet
 
20 - 21
Statement of Changes in Equity
 
22 - 23
Statement of Cash Flows
 
24 - 25
Notes to the Financial Statements
 
26 - 51


 
BLOCKCHAIN ACCESS UK LTD
 
 
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020

Introduction

Blockchain Access UK Ltd (“the Company”) was incorporated on 30 April 2018. The Company is the fully owned subsidiary of Blockchain.com Group Holdings, Inc. (“the Parent Company”, and together with other fully owned subsidiaries of the Parent Company, referred to as “the Group”).

Business review

During the year, the Company’s principal activity is to facilitate the exchange of digital assets allowing consumers and businesses to securely transact in digital assets. The Company primarily derives its revenues from digital asset transaction services, where users can buy, sell and swap digital assets for a service fee. The Company also provides digital assets loans to customers and earns lending fees on these loans. The Parent Company on a consolidated group basis conducts business under the name Blockchain.com.

For the year ended 31 December 2020, the Company recognised total revenue of $429.6m (compared to $173.5m as of 31 December 2019), and cost of sales, including impairment loss from digital assets, of $436.7m (compared to restated $191m as of 31 December 2019), resulting in a gross loss of $7.1m (compared to a restated $17.5m gross loss as of 31 December 2019).

Overall, revenue increased in 2020 due to an increase in the number of users, both from a higher trading volume and from an expanding user base. OTC revenue increased, which was $150.5m for the year ended 31 December 2020 (compared to $49m as of 31 December 2019). Swap revenue increased, which was $166.8m for the year ended 31 December 2020 (compared to $112m as of 31 December 2019). Additionally we saw the full year impact of the new 2019 revenue stream related to the Exchange which was $73.3m for the year ended 31 December 2020 (compared to $5.9m as of 31 December 2019). The increase in both OTC and Swap revenue was driven by a combination of both increased activity and increasing crypto prices throughout the period. Over the course of 2020, there was an increase in lending fee revenue, driven by an increase in loans issued and additional lending counterparties. This in turn led to an increase of revenue to $19.6m for the year ended 31 December 2020 (compared to $1.36m as of 31 December 2019). An expansion of the trading desk meant an increase in the trading revenue generated to $19.36m compared to the $5.18m in 2019.

The Company accounts for the cost of the crypto currency used to fulfill customer orders in both the OTC and Swap product as a cost of sale. Due to an increase in trading volume in the OTC and Swap product, cost of sales increased. Over the period, the Company also incurred cost of sales expenses related to impairment loss of $134.8m. The increase in trading volume and impairment loss incurred meant cost of sales during the year 2020 increased to $436.7m from $190.9m in 2019 which led to a gross loss of $7.1m compared to the $17.5m loss incurred in 2019. 

Other operating expenses increased to $249m for the year ended 31 December 2020 (compared to $27.5m of other operating income as of 31 December 2019), driven by an increase in unrealized losses on amounts owed in digital assets. Within the year $320.7m (2019: $18.0m gain) of expense was incurred related to unrealised losses from digital assets, with a realised gain of $72m marginally offsetting the unrealised loss.

The Company's total current assets grew to $683.4m as of 31 December 2020 (compared to $181.5m as of 31 December 2019). The increase was mainly driven by an increase in Digital assets held by the company, which grew to $272.5m (compared to $30m as 31 December 2019). Short term loan receivables also grew to $83.8m as of 31 December 2020 (compared to $15.4m as of 31 December 2019). This increase was driven by a general increase in the Company’s lending activities. Digital assets lent to customers also saw a considerable increase to $213.3m (compared to $119m as of 31 December 2019).

The Company held $49m of cash including custodial deposits as part of the usual course of business for the period ending 31 December 2020. An increase in customer base and volume of transactions lead to the Company holding $32.5m of custodial cash held (compared to $6.5m at 31 December 2019). The Company 


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STRATEGIC REPORT (CONTINUED)
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also held $16.4m of cash at bank and in hand as at 31st December 2020 (compared to $0.2m at 31 December 2019).

During the period of FY 2020 the Company made an investment of $4.9m in an unlisted private company. A fair value gain of $10.3m was recorded as at 31 December 2020. Additionally, warrants to the value of $171k were awarded to the Company. As at 31 December 2019 the value of investments was $nil.

The Company held $15.6m in derivative financial assets at 31 December 2020. An unrealised gain of $2.98m and realised gain of $2.92m was recognised in the Statement of Comprehensive Income. As at 31 December 2019 the value of derivative financial assets was $nil.

Overall, creditors falling due within one year grew from $174.8m at 31 December 2019 to $975.8m as at 31 December 2020.This growth was driven by an increase in operational activities and the number of clients the company serviced over the period. These creditors consist of payables that are due within one year or can be called on demand. Due to the increased number of lending counterparties and number of loans issued there was an increase in Crypto borrowings and collateral payable to $758.5m as at 31st December 2020 (compared to $119.2m as at 31st December 2019). For creditors falling due after more than one year, this dropped to $30.9m as at 31st December 2020 (compared to $39.0m as at 31st December 2019). A decrease in crypto borrowings and collateral payable falling due after more than one year was the main driver of this.

Principal risks and uncertainties
 
Risk related to COVID-19

The World Health Organization declared in March 2020 that the outbreak of the coronavirus disease (COVID-19) constituted a pandemic. The COVID-19 pandemic has caused general business disruption worldwide beginning in January 2020. In response to the pandemic and for the protection of employees, the Company adopted flexible working patterns in order to maintain uninterrupted services to customers. The Company has assessed the extent to which COVID-19 impacts events after the reporting date and have not identified additional items to disclose as a result.

Risk of a cyber-attack or security breach

The Company maintains personal data for its customers and information required to access their crypto assets. A cyber-attack or security breach could potentially lead to a host of adversarial events, including financial impact on financial statements due to potential provisions for losses, regulatory investigations, penalties and fines, lawsuits, remediation costs, our services being unavailable and interrupting our operations among others.

The Company recognizes that a potential cyber-attack or security breach is an industry wide threat; and a potential cyber-attack directed at financial institutions and/or crypto companies, may cause a general loss of customers' confidence in the crypto economy, which may ultimately impact the Company's brand and financial performance. Cyber attackers wishing to infiltrate the Company's systems are highly sophisticated and well organised; however, the Company is continuously designing and implementing safeguards to manage and prevent potential security breaches. Examples of such malicious activity may include social engineering, phishing, hacking, or even insider threats, system errors and errors by employees. While some of this activity may not be detected immediately, the Company continues to dedicate costs and resources to protect its customers and employees from these potential threats on an ongoing basis.

Cyberattacks and security breaches of the Company’s platform, or those impacting its customers or third parties, could adversely impact the Company’s brand, reputation, business, operating results, and financial condition. The Company’s business involves the collection, storage, processing, and transmission of confidential information, customer, employee, service provider, and other personal data, as well as information required to access customer assets. The Company has built its reputation on the premise that its platform offers customers a secure way to purchase, store, and transact in crypto assets. As a result, any actual or perceived security breach of the Company or its third-party partners may:

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STRATEGIC REPORT (CONTINUED)
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•      harm its reputation and brand;
•      result in its systems or services being unavailable and interrupt its operations;
•      result in improper disclosure of data and violations of applicable privacy and other laws;
•      result in significant regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory, and
       financial exposure;
•      cause the Company to incur significant remediation costs;
•      lead to theft or irretrievable loss of the Company’s or our customers’ fiat currencies or crypto
       assets;
•      reduce customer confidence in, or decreased use of, our products and services;
•      divert the attention of management from the operation of the Company’s business;
•      result in significant compensation or contractual penalties from the Company’s to its customers or 
       third parties as a result of losses to them or claims by them; and
•      adversely affect the Company’s business and operating results
 
Risk of loss of private keys

Crypto assets are generally controlled only by the possessor of the unique private key relating to the digital wallet in which the crypto assets are held. While blockchain protocols typically require public addresses to be published when used in a transaction, private keys must be safeguarded and kept private in order to prevent third parties from accessing the crypto assets held in such a wallet. To the extent that any of the private keys relating to the Company’s wallets containing crypto assets held for its own account or for its customers are lost, destroyed, or otherwise compromised or unavailable, and no backup of the private key is accessible, the Company will be unable to access the crypto assets held in the related wallet. Further, the Company cannot provide assurance that its wallet will not be hacked or compromised. Crypto assets and blockchain technologies have been, and may in the future be, subject to security breaches, hacking, or other malicious activities. Any loss of private keys relating to, or hack or other compromise of, digital wallets used to store the customers’ crypto assets could adversely affect the customers’ ability to access or sell their crypto assets, require the Company to reimburse the customers for their losses, and subject the Company to significant financial losses in addition to losing customer trust in it. As such, any loss of private keys due to a hack, employee or service provider misconduct or error, or other compromise by third parties could hurt the Company’s brand and reputation, result in significant losses, and adversely impact the Company’s business.

Regulatory Risk

The regulation of investing and financial businesses is extremely complex; digital assets make up a relatively new and rapidly evolving space. The Company intends to use its internal legal and compliance expertise, in consultation with its outside counsel, to determine how to engage in its business activities so as to obtain the appropriate licenses or to be able to rely on an exception or exemption from any relevant registration requirement. We will continue to monitor the laws and guidance issued in these jurisdictions that may be applicable to our business.

Volatility Risk

The Company trades, invests and holds primarily digital assets and investments in the blockchain space and conduct related businesses. The Company may accumulate significant positions in, or otherwise have significant exposure to, a single digital asset or asset type. If the Company chooses to invest in concentrated positions, the Company could be exposed to an increase in volatility of its investment results over time, and to an increased risk that a loss in any position may have a material effect on its investment and trading strategies. The Company is exposed to significant market risk based on its positions in digital assets. The prices or values of digital and non-digital assets in which the Company may invest, or trade, have been, and likely will continue to be, highly volatile. Sustained market declines and periods of significant market volatility may limit the Company’s ability to produce positive investment and trading results, and there can be no assurance that the strategies deployed by the Company will be successful in the markets and assets in which the Company invests or trades. The Company’s risk committee constantly evaluates market risk exposure and establishes risk management procedures. The Company has elected to operate with less cryptocurrency exposure than would be required to
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maintain a stable leverage ratio. 

Competition Risk

The Company operates in an industry that is highly innovative, rapidly evolving, and characterized by healthy competition, experimentation, changing customer needs, frequent introductions of new products and services, and subject to uncertain and evolving industry and regulatory requirements. The Company expects competition to further intensify in the future as existing and new competitors introduce new products or enhance existing products. The Company competes against a number of companies whose operations are focused on crypto- based services, as well as companies providing traditional financial services. If the Company is unable to compete successfully, or if competing successfully requires the Company to take costly actions in response to the actions of its competitors, its business, operating results, and financial condition could be adversely affected.

Industry developments

The industry has been characterized by rapid, significant, and disruptive products and services in recent years. These include decentralized applications, DeFi, yield farming, staking, token wrapping, governance tokens, innovative programs to attract customers such as transaction fee mining programs, initiatives to attract traders such as trading competitions, airdrops and giveaways, staking reward programs, and novel cryptocurrency fundraising and distribution schemes, such as “initial exchange offerings.” The Company expect new services and technologies to continue to emerge and evolve, which may be superior to, or render obsolete, the products and services that the Company currently provides. The Company cannot predict the effects of new services and technologies on its business. However, its ability to grow its customer base and net revenue will depend heavily on our ability to innovate and create successful new products and services, both independently and in conjunction with third-party developers. In addition, the Company’s ability to adapt and compete with new products and services may be inhibited by regulatory requirements and general uncertainty in the law, constraints by our banking partners and payment processors, third-party intellectual property rights, or other factors.

Risk of loss of banking partners

The Company may be harmed by the loss of any of its banking partners and trading venues. As a result of the many regulations applicable to cryptocurrencies or the risks of digital assets generally, financial institutions may decide to not provide bank accounts (or access to bank accounts), payments services or other financial services to companies providing cryptocurrency products. Banks may refuse to provide bank accounts and other banking services to digital asset-related companies, including the Company, for a number of reasons, such as perceived compliance risks or costs. The Company’s inability to procure or keep banking services would have a material and adverse effect on us. Similarly, continued general banking difficulties may decrease the utility or value of digital assets or harm public perception of those assets. Consequently, if the Company cannot maintain sufficient relationships with the banks, banking regulators restrict or prohibit banking of cryptocurrency businesses, or if banks impose significant operational restrictions, it may be difficult for the Company to find alternative business partners for its cryptocurrency offerings, which may result in a disruption of its business and could have an adverse impact on our reputation, business, investment and trading strategies, the value of our assets, the value of any investment in the Company, financial condition and results of operations.

Risks related to Russia - Ukraine Conflict

The Company is currently monitoring the conflict between Russia and Ukraine. The Company could experience in the future negative impacts to its businesses and results of operations as a result of the recent action of Russian military forces and support personnel in Ukraine, which has escalated tensions between Russia and the U.S., NATO, the EU and the U.K. The U.S. EU and the U.K. have imposed, and is likely to impose material additional, financial and economic sanctions and export controls against certain Russian and Belarussian organizations and/or individuals. During the week of February 21, 2022, the U.S., the U.K., and the EU each

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imposed packages of financial and economic sanctions that, in various ways, constrained transactions with numerous Russian and Belarussian entities and individuals, or in certain regions of Ukraine. The Company’s ability to engage in activity with certain consumer and institutional businesses in Russia and Ukraine or involving certain Russian or Ukrainian businesses and customers is dependent in part upon whether such engagement is restricted under any current or expected U.S., U.K., EU and other countries sanctions and laws. The Company has complied with the sanctions that have been imposed and have not observed any material impact to its operations.

Risk related to Brexit

The United Kingdom’s withdrawal from the European Union (“Brexit”), has created uncertainty regarding data protection regulation in the United Kingdom. As of January 1, 2021, following the expiry of transitional arrangements agreed to between the United Kingdom and EU, data processing in the United Kingdom is governed by a United Kingdom version of the GDPR (combining the GDPR and the United Kingdom’s Data Protection Act 2018), exposing the Company to two parallel regimes, each of which authorizes similar fines and other potentially divergent enforcement actions for certain violations. With respect to transfers of personal data from the EEA to the United Kingdom, the European Commission has published its draft adequacy decision, finding that the United Kingdom ensures an adequate level of data protection. Before the decision is formally adopted, the European Data Protection Board will need to issue a non-binding opinion on the draft and each member state must approve the decision. In the interim, transfers of personal data from the European Economic Area (EEA) to the United Kingdom will not be considered transfers to a third country. Following the adoption of the adequacy decision, there will be increasing scope for divergence in application, interpretation and enforcement of the data protection law as between the United Kingdom and EEA. Other countries have also passed or are considering passing laws requiring local data residency or restricting the international transfer of data. These changes may lead to additional costs and increase to the Company’s overall risk exposure.

Financial risk management policy objectives

The Company's activities may expose it to a variety of financial risks, including digital asset risk, credit risk, and liquidity risk, among others. The Company seeks to minimise potential adverse effects of these risks by employing experienced personnel, ongoing monitoring of transactions, digital asset inventory and credit risk exposures as well as a review and analysis of market and industry events that may have adverse impact on the Company's financial performance.

Digital asset risk

The market price of digital assets, including crypto currency assets, is affected by various forces including global supply and demand, interest rates, exchange rates, inflation or deflation and political and economic conditions. Digital asset prices are very volatile, and market movements are difficult to predict. Supply and demand for such assets change rapidly and may be affected by general economic trends as well as current and future regulatory regimes and sovereign government actions and laws. The Company expects to see significant fluctuations in its total revenues as it is predicated on the digital asset market prices and how digital assets perform within the broader crypto ecosystem.

Credit Risk

Credit risk is the risk that a counterparty to a transaction will fail to meet its obligation or commitment under the contract causing the other party to incur a financial loss. The Company's cash and cash equivalents, accounts held with third-party crypto currency exchanges, crypto loan and collateral receivables and other receivables are exposed to credit risk. The Company limits its credit risk exposure by placing its cash and digital assets with high credit quality financial institutions and cryptocurrency exchanges, on which the Company has performed internal due diligence procedures that include the review of the crypto exchanges' anti-money 

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laundering ("AML") and know-your-client ("KYC") policies, setting balance limits for crypto exchange accounts based on risk exposure thresholds and preparing regular asset management reports to ensure limits are being followed. The Company limits its credit risk with respect to its receivables, crypto loan and collateral receivables and other receivables by transacting with credit worthy counterparties that are believed to have sufficient capital to meet their obligations as they come due and, with regards to over-the-counter and crypto lending and borrowing counterparties, on which the Company has satisfactorily performed the relevant internal due diligence, AML and KYC procedures.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due, as well as the risk of not being able to liquidate assets at reasonable prices. The Company manages liquidity risk by maintaining sufficient cash and digital assets balances to enable settlement of its liabilities. The Company intends to manage its short-term liquidity needs through its available cash and digital assets balances as well as inflows of cash and digital assets from its ongoing business activities.

Key Performance Indicators

The Company’s key performance indicators for the year ended December 31, 2020 are revenue, total current assets and trading volume (defined as the total quantity of an asset that has been traded within the period).

Total revenue of the Company increased by 147% year on year. Retail trading Volumes increased from $172m in 2019, to $891m in 2020. Total current assets increased from $181.5m in 2019 to $683.4m in 2020.

Section 172 (1) Statement

The Directors of the Company strive to act in ways most likely to promote the success of the business for the benefit of its stakeholders having regard to the matters set out in S172 (1) of the Companies Act 2006 when making strategic decisions. 

The following Section 172 (1) statement is made on behalf of the Company in Compliance with the requirements.


Foster business relationships with suppliers, customers and other stakeholders

Shareholders

The Company has an open dialogue with the shareholders. Discussions with shareholders include a wide range of topics including financial performance, strategy, governance, and outlook. Shareholder feedback is discussed by the Board and is considered in decision making.

Suppliers

The Company works hard to ensure that its suppliers are treated fairly and are valued and that relationships with them can be managed actively. Key areas of focus include innovation and product development.

Customers

The Company is customer focused which is why customer service is essential. The Company is always looking for new ways to strengthen customer services and is continuously engaging with customers to build even

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deeper relationships. The Company leverages these relationships to make decisions regarding its continued product development.

Community and Environment

Building trust with customers and the communities around them is important. The Company aims to facilitate positive change for the people and communities in which it interacts.

Business conduct

The Company seeks to operate with high ethical standards and integrity by conducting business activities in compliance with applicable legal and regulatory requirements. The Company also implements internal policies governing behaviour and conduct as well as policies that protect customers and promote better services. The Company undertakes an ongoing review of how evolving legislation, guidelines and best practices should be best reflected on topics including conduct, risk, compliance and the sustainable development of the industry.


Acting fairly between shareholders

The Company is committed to acting fairly with its shareholders and being transparent in its activities and directions.

Likely consequences of any decision in the long term

Each year, a review of the Company’s strategy is carried out for the following year and beyond as part of the budgeting process. This helps to plan ahead and also forms the basis for financial budgets and planning and other strategic plans. The Company considers the long term implications of any decisions made with its stakeholders in mind and its long term reputation.

In 2020, the Financial Conduct Authority (FCA) amended the existing UK Money Laundering Regulations to include crypto asset exchange providers and custodian wallet providers. The Company duly complied with the amendment and registered with the FCA, with the intent on obtaining a permanent license to continue uninterrupted service to its customers. Throughout 2020, the Company continuously consulted with the FCA and maintained internal risk management and governance systems in the changing regulatory environment in 2020. 

In 2021, in consultation with the FCA, the Company withdrew its application with the FCA given the FCA’s then position on international crypto asset exchange providers. Accordingly, the Group restructured its operations and realigned business activities to subsidiaries abroad.

Environmental, Social and Governance

The Company assesses changes to environment, social, and governance impacts on its business on a regular basis as a holistic effort.  A cross-functional team is assessing business strategy, risk, marketing, public policy, and markets.  Industry and policy discussions are considered to address climate risks as new tools and long term changes to operations are developed to contribute to clean energy projects, conservation opportunities, and offset transaction emissions.

Future developments

During the subsequent fiscal year, the Company initially continued to function largely the same as in 2020. The

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Company continued to focus on the growth opportunities that the digital market presents by investing in its digital platforms and expanding its products and services. The strategy during this time period included the following:

-   Develop its digital platforms and expand product and service offerings to customers;
-   Support customer retention and growth;
-   Promote and support the growth of the digital economy;
-   Manage risk and compliance through enhanced transaction monitoring, AML and KYC policies and 
    procedures.
 
In 2022, the Company underwent a global restructuring to align with the changing regulatory landscape in crypto, while continuing to invest in the key business strategies outlined above. The Company restructured its activities, to the effect that its Group subsidiaries abroad retained and managed contractual relationships with clients, while retaining the intellectual property of the digital platform to continue to provide infrastructure services to those subsidiaries. This changed the role of having all operations of the Company centralised in the UK and allowed for more agility to service the existing customer base.


This report was approved by the board and signed on its behalf.


N Cary
Director

Date: 9 October 2024

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BLOCKCHAIN ACCESS UK LTD
 
 
 
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020



The Directors present their report and the financial statements for the year ended 31 December 2020.

Principal activity

Blockchain Access UK Ltd (“the Company”) was incorporated on 30 April 2018. The Company is the fully owned subsidiary of Blockchain.com Group Holdings, Inc. (“the Parent Company”, and together with other fully owned subsidiaries of the Parent Company, referred to as “the Group”). The Company’s principal activity is to facilitate the exchange of digital assets allowing consumers and businesses to securely transact in digital assets.

The Company primarily derives its revenues from digital asset transaction services, where users can buy, sell and swap digital assets for a service fee on both its Wallet and Exchange platforms. The Company also provides digital assets loans to customers and earns lending fees on these loans. 

Directors' responsibilities statement

The directors are responsible for preparing the Strategic Report, the Directors' Report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

 In preparing these financial statements, the directors are required to:

select suitable accounting policies for the Company's financial statements and then apply them consistently;

make judgments and accounting estimates that are reasonable and prudent;

state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Results and dividends

The loss for the year, after taxation, amounted to $285 (2019 Restated loss - $17.8m).
During 2020 and 2019, dividends were neither proposed nor paid. 

Directors

The directors who served during the year were:
N Cary 
S P Smith (Resigned on 8 November 2022)
A Turnbull (Appointed on 1 November 2022)
 

Page 9

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020

Going concern

For the year ended 31 December 2020 the Company had a net loss of $285m (including an impairment expense of $135m), compared to a net loss of $18m in 2019. Total revenue of the Company increased from $173m for the year ended 31 December 2019, to $430m for the year ended 31 December 2020. Additionally, the Company saw an increase in total current assets from $181m in the year ended 31 December 2019 to $683m in the year ended 31 December 2020. The Directors have considered the going concern status taking account of the entity’s financial performance and the following matters/information:

The Company may face future negative impacts to its business and results of operations as a result of ongoing global geo-political events, which includes but is not limited to the conflict between Russia and Ukraine. As at the date these financial statements have been signed, these events have had no observed material adverse impact on the Company’s operations, capital raising ability, or on trading.

The Group, which the Company is a subsidiary of, underwent a significant global operational restructuring (from March 2022 to July 2023), to align with the changing regulatory landscape around the crypto sector. As a result, subsidiaries, other than the Company, now hold the contractual relationships with the Group’s clients, with the Company retaining the intellectual property of the exchange platform, as well as providing infrastructure services to those subsidiaries. The underlying legal agreements supporting these updated inter-company arrangements have short term, albeit market standard, notice periods and may therefore be withdrawn at short notice. It is noted that the infrastructure services are provided on a revenue split based on transactional volume at the rate of 65%. While the Company is integral to this updated global business model, it is also highly dependent on this model continuing in its deployed form and there being no adverse impact on the operations of the wider group which would limit cashflows and potentially limit continued working capital funding by its Parent Company. 

The Directors have obtained, considered and discussed with the directors of the Parent Company the current Group operational performance, together with budgets and cash flow forecasts for the Group covering up to a sixteen month period post approval of the financial statements, as approved by the management of the Parent Company.  Based on these discussions, the Directors note that there will not be any material change in either the business activities of the Parent Company, the Company, nor the capital cost structure. The Directors have also evaluated the sustainability and feasibility of the future plans of the Company and its operating model, in light of the discussions with the Parent Company, which confirmed there was no intention for the Company to cease trading in the foreseeable future too.

Given the late filing of financial statements with Companies House, the Directors of the Company have received court summonses.  The Directors have considered the court summonses they received relating to their failure to submit the Company’s annual accounts to the UK company registrar, Companies House, in respect of its financial year ending 31st December 2022, and the potential uncertainties related to the outcome of this process.  As set out in the Note 2.3 - Laws and Regulations the case being brought is against the Directors rather than the Company and based on the advice received from external legal counsel, the Directors do not believe that there is a risk that court proceedings could be brought against the Company. The Directors are also of the view that there is no consequential impact from the case against the Directors that will impact the ability of the Company to continue as a going concern. The Directors have concluded that, although there is uncertainty in this respect, the uncertainty does not itself have a material impact on the ability of the Company to continue as a going concern. 

The Parent Company has provided working capital assurances in the form of a non-binding letter of support that provides that the necessary funding will be forthcoming if and when it becomes required. The Directors have also concluded that the Parent Company and the Group are in a position to provide this financial support, should it be considered necessary. The non-binding letter of support records the financial support that the Parent Company will provide to ensure that the Company can meet its liabilities as and when they fall due, including any cash shortfalls and working capital needs that may arise for a period of at least 16 months from the date of approval of the Company’s 31 December 2020 Accounts. This is supplemented by a deed poll guarantee dated 22 March 2022, as amended, issued by the Parent Company (the “Parent Guarantee”) pursuant to which the Parent Company guarantees the financial obligations of the Company. The Directors anticipate that this funding, as required, will be forthcoming from the Parent Company. The combination of the non-binding letter of support and the Parent Guarantee will be necessary to ensure that the Company is able to meet its obligations as they fall
Page 10

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020

due.

The Parent Company’s non-binding letter of support has been provided with the full knowledge of the above noted court summons against the Directors of the Company and after considering the potential consequential impact of the court summons against the Directors on to the Company.  

Taking account of the above factors and considering the mitigations to risks to the ability of the Company to continue as a going concern, the Directors believe that the Company, with the Parent Company support, has adequate resources to continue as a going concern for the foreseeable future. This conclusion is based upon the non-binding letter of support, the Parent Guarantee, and the inter-company arrangements in place to support the infrastructure services provided to other subsidiaries and the wider group. 

The financial statements do not include the adjustments that would be required should the going concern basis of preparation no longer be appropriate.

Laws and Regulations

The directors of the Company each received a court summons dated 30th May 2024 relating to their failure to submit the Company’s annual financial statements to the UK company registrar, Companies House, in respect of its financial year ending 31st December 2022 in accordance with section 441 and 442 of the England & Wales Companies Act 2006. A case management hearing is currently scheduled for 26th November 2024. The directors are working with their legal advisers to defend the matter.  Based on legal advice received from the Company’s external legal counsel, the Directors do not believe there is any potential impact to the Company directly because of the court summonses received by the Directors.  The directors are not aware that any action is being taken against the Company at this time related to the late filing of its annual financial statements.  The Directors are also confident that there is no direct impact on the Company as a result of the court summonses received by the Directors anticipated in the foreseeable future, based on the external legal advice received.

The reasons that the directors of the Company are late submitting the financial statements are the result of two key challenges faced by themselves and impacting the Directors and the Company’s finance function.  The first being the need to restructure the wider Blockchain group’s business model as a result of the Financial Conduct Authority’s (‘FCA’) implementation of certain key regulations that were unforeseeable by the Company.  Secondly, the well-documented 2022 crypto sector market collapse had significant consequences for the Company, including a significant reduction in the wider group’s workforce.  This had a significant impact on management, administrative and finance functions’ time and availability, which has taken a period of time to stabilise and ensure that the required resources are in place.

This non-compliance does not have an impact on the Company’s financial position and performance as at 31 December 2020.  The Directors of the Company and the Parent Company are fully committed to remediate the Company’s compliance with respect to all statutory annual filings of the Company. As part of their commitment, the Directors are taking appropriate steps to remediate the Company's compliance with all statutory annual filing requirements as efficiently as possible.  The steps that have been or will be put in place include:

- Recruiting additional appropriately qualified members of staff in the accounting function to provide the 
 capacity and skills to prepare their financial statements and underlying books and records to be audited;
- Engaging an external professional accounting firm to further enhance the Company’s accounting 
 functions;
- Establishing specific cross-functional groups within the Company, including the Directors, to prioritise, 
 oversee and assign ownership of responsibilities to expedite the remediation process;
- Establishing a dedicated Company Secretarial function with the responsibility for corporate governance 
 matters across the wider group, including the Company;
- Actively engaging with the Company’s external auditors regarding the completion of the audits for future 
 years;
 
Should the Directors need to take additional action above those already in place, such as further recruitment, appointment of additional directors to provide greater capacity to support the working groups or expanding the
Page 11

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020

scope of the external professional accounting firm’s project, they will do so.

There is a possibility that separate direct action may be taken against the Company directly as a result of the failure to submit financial statements to Companies House in the future.  Based on legal advice received, the directors believe that this is unlikely, given the steps put in place, and the plans to continue to operate the business on the existing operating model for the foreseeable future.

However, the remediation process may take longer than the Directors anticipate, given the complexities in the business and the length of time that an audit of each year may take.  Should further delays occur, this could cause further uncertainty over the potential actions Companies House could take against the Directors. This may result in further unforeseen actions against the Directors.

Engagement with suppliers, customers and others

As is normal for companies of our size, operational decision making of day-to-day activities are delegated to management.  Management deeply understands its customers to deliver an experience that is both high quality and targeted to their specific needs. Over the course of the year, management shares relevant decision making on business relationships and compliance matters with the Company’s board.  

Emissions and energy consumption

The Company has no employees and no direct emissions or energy consumption.  In the industry, the primary cause of energy consumption is from mining operations of which the Company does not conduct.   Any energy consumption would relate to development of technology and general infrastructure born by other Group entities.

Directors' liability insurance and indemnities

The Company has a Directors & Officers insurance policy in place to cover its Directors against costs arising from defending themselves in legal proceedings taken against them as a direct result of duties carried out on behalf of the Company.

As permitted by Articles of Association, the Directors have the benefit of Side A (Non-indemnifiable) and Side B (Indemnifiable); both coverages are designed to protect the individual Director and Officer as defined by Section 230 of the Companies Act 2006. The indemnity was in force through the financial year and continues to be in force.     

Page 12

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020

Subsequent events

In accordance with accounting standards affecting disclosures of subsequent events, the Company evaluated subsequent events for recognition and disclosure to 8 October 2024, the date at which these financial statements were available to be issued. Management concluded that, other than those noted below, no material subsequent events have occurred since 31 December 2020 that require recognition or disclosure in the financial statements.

In April 2021, the Company engaged in an asset purchase of the business, goodwill, intellectual property, software and IT systems of AI Exchange LTD., a company that has built an AI-powered negotiation and matching engine for institutional OTC traders. As a consideration for the acquisition, the parent company issued warrants valued around $1.6m to AI Exchange LTD.

On 22 October 2021, the Board and shareholders of Blockchain Luxembourg S.A. approved the migration of the parent company to the Cayman Islands, which was carried out by way of a continuation of the legal entity. The renamed entity was deregistered from Luxembourg and reregistered with the Cayman Islands Companies Registry on 25 October 2021 in the name of Blockchain.com Group Holdings, Inc

In February 2022, the Company underwent a global restructuring to align with the changing regulatory landscape in crypto. Beginning in March 2022 and ending in July 2023, the Company restructured its activities. The result being Group subsidiaries abroad housing contractual relationships with clients, while the Company retained the intellectual property of the digital platform to continue to provide infrastructure services to those subsidiaries.

Three Arrows Capital (3AC), a Singapore-based hedge fund, filed for bankruptcy in July 2022. The Company incurred a loss as a result of lending to 3AC which was ultimately recognized by the 3AC joint liquidators in the bankruptcy estate at $639,593,557. The Company sold a portion of the claim in order to recoup some of the loss. The Company remains a creditor in the insolvency estate.

In November 2022, FTX, a Bahamas-based cryptocurrency exchange, filed for bankruptcy. FTX was a leading centralised cryptocurrency exchange specializing in derivatives and leveraged products. The Group’s loss position amounted to $3,664,872.76 and was borne by the Company's affiliated entity, located in Singapore. On 31 March 2023, the Group assigned its claims against FTX to a credit company for an aggregate amount of $549,730.93. The financial impact on the Company was immaterial, at around $24,000.

March 2023 saw the collapse of Silvergate and Signature Bank. The Company. moved all funds held at banks affected by these closures and did not incur any losses.

An agreement with Griid Infrastructure LLC came to an end in June 2024, when the Company agreed to a full release of debt, security interests and other claims to the value of $68m inclusive of $10.8m of interest. The settlement was reached under the Griid Credit Agreement at a substantial discount, with the Company receiving $15m as full and final consideration for the release of all obligations under the agreement.

The Directors of the Company each received a court summons dated 30th May 2024 relating to the Company’s failure to submit its accounts to Companies House in respect of its financial year ending 31st December 2022. A case management hearing is currently scheduled for 26th November 2024. The directors are working with their legal advisers to defend the matter. See Note 2.3 for further details.

In July 2024, Celsius Network LLC, et al (post-effective date debtors) filed an action against the Company in the United States Bankruptcy Court, Southern District of New York seeking recovery of purported avoidable transfers and purported unauthorized setoffs. The Company disputes the claims and intends to vigorously defend against them.

Page 13

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020

Disclosure of information to auditors

Each of the persons who are directors at the time when this Directors' Report is approved has confirmed that:
 
so far as the director is aware, there is no relevant audit information of which the Company's auditors are unaware, and

the director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Auditors

The auditorsBDO LLPwill be proposed for reappointment in accordance with section 489 of the Companies Act 2006.

This report was approved by the board and signed on its behalf.
 





N Cary
Director

Date: 9 October 2024

Page 14

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF BLOCKCHAIN ACCESS UK LTD
 

Opinion on the financial statements

In our opinion the financial statements:
give a true and fair view of the state of the Company’s affairs as at 31 December 2020 and of its loss for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements of Blockchain Access UK Ltd (“the Company”) for the year ended 31 December 2020 which comprise Statement Of Comprehensive Income, Balance Sheet, Statement Of Changes In Equity, Statement Of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice). 

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

Other information

The Directors are responsible for the other information. The other information comprises the information included in the Directors report and financial statements, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
Page 15

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF BLOCKCHAIN ACCESS UK LTD
 


We have nothing to report in this regard.

Other Companies Act 2006 reporting

In our opinion, based on the work undertaken in the course of the audit:
the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic report or the Directors’ report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.

Responsibilities of Directors

As explained more fully in the Statement of Directors Responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

Non-compliance with laws and regulations
Based on:
Our understanding of the Company and the industry in which it operates;
Discussion with management, those charged with governance and their legal counsel;
Obtaining and understanding of the Company’s policies and procedures regarding compliance with laws and regulations; 
Page 16

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF BLOCKCHAIN ACCESS UK LTD
 


we considered the significant laws and regulations to be the Companies Act, the applicable accounting framework, UK tax legislation, etc. 

The Company is also subject to laws and regulations where the consequence of non-compliance could have a material effect on the amount or disclosures in the financial statements, for example through the imposition of fines or litigations. We identified such laws and regulations to be the Finance Act, Anti-Money Laundering regulations, FCA regulations, Data Protection Act.

Our procedures in respect of the above included:
Review of minutes of meeting of those charged with governance for any instances of non-compliance with laws and regulations;
Review of correspondence with tax authorities for any instances of non-compliance with laws and regulations;
Review of financial statement disclosures and agreeing to supporting documentation;
Involvement of tax specialists in the audit;
Review of legal expenditure accounts to understand the nature of expenditure incurred;

Fraud
We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk assessment procedures included:
Enquiry with management and those charged with governance regarding any known or suspected instances of fraud;
Obtaining an understanding of the Company’s policies and procedures relating to:
°Detecting and responding to the risks of fraud; and 
°Internal controls established to mitigate risks related to fraud. 
Review of minutes of meeting of those charged with governance for any known or suspected instances of fraud;
Discussion amongst the engagement team as to how and where fraud might occur in the financial statements;

Based on our risk assessment, we considered the areas most susceptible to fraud to be Revenue Recognition, Management Override of Controls, and Inventory (Cryptocurrencies).

Our procedures in respect of the above included:
Testing a sample of journal entries throughout the year, which met a defined risk criteria, by agreeing to supporting documentation;
Assessing significant estimates made by management for bias including impairment assessment and challenging the underlying inputs and assumptions.

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were all deemed to have appropriate competence and capabilities and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.  

Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https/www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Page 17

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF BLOCKCHAIN ACCESS UK LTD
 

Use of our report

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.


  



David Butcher  (Senior Statutory Auditor) 
For and on behalf of BDO LLP, Statutory Auditor
London, UK
09 October 2024


BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Page 18

 
BLOCKCHAIN ACCESS UK LTD
 
 
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020

As restated
2020
2019
Note
$000
$000

  

Revenue
 3 
429,618
173,455

Cost of sales
  
(436,703)
(190,988)

Gross loss
  
(7,085)
(17,533)

Administrative expenses
  
(28,943)
(27,753)

Other operating (expense)/ income
 4 
(249,035)
27,489

Operating loss and loss before taxation
 5 
(285,063)
(17,797)

Tax on loss
 8 
10
(23)

Loss after taxation and total comprehensive income for the year
  
(285,053)
(17,820)

  

There were no recognised gains and losses for 2020 or 2019 other than those included in the statement of comprehensive income.

The notes on pages 26 to 51 form part of these financial statements.



Page 19

 
BLOCKCHAIN ACCESS UK LTD
REGISTERED NUMBER: 11337627

BALANCE SHEET
AS AT 31 DECEMBER 2020

As restated
2020
2019
Note
$000
$000

Fixed assets
  

Tangible assets
 9 
68
121

Investments
 10  
15,313
-

Digital assets lent to customers
 12 
-
6,630

Loan receivables
 13 
-
2,724

  
15,381
9,475

Current assets
  

Debtors: amount falling due within one year
 14 
49,179
10,062

Investment in derivatives
 17
15,628
-

Short term loans receivable
 13 
83,821
15,409

Digital assets lent to customers
 12 
213,289
119,211

Digital assets
 11 
272,475
30,080

Custodial cash held at bank
  
32,566
6,527

Cash at bank and in hand
  
16,440
219

  
683,398
181,508

Creditors: amounts falling due within one year
 15 
(975,819)
(174,851)

Net current (liabilities)/assets
  
 
 
(292,421)
 
 
6,657

Total assets less current liabilities
  
(277,040)
16,132

Creditors: amounts falling due after more than one year
 16 
(30,950)
(39,069)

  

Net liabilities
  
(307,990)
(22,937)


Capital and reserves
  

Called up share capital 
 19 
-
-

Profit and loss account
  
(307,990)
(22,937)

  
(307,990)
(22,937)


The financial statements were approved and authorised for issue by the board and were signed on its behalf on 9 October 2024.

N Cary
Director

The notes on pages 26 to 51 form part of these financial statements.

Page 20

 
BLOCKCHAIN ACCESS UK LTD
REGISTERED NUMBER: 11337627
    
BALANCE SHEET (CONTINUED)
AS AT 31 DECEMBER 2020


Page 21

 

 
BLOCKCHAIN ACCESS UK LTD


 

STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020



Called up share capital
Profit and loss account
Total equity


$000
$000
$000


At 1 January 2020
-
(22,937)
(22,937)



Comprehensive income for the year


Loss for the year

-
(285,053)
(285,053)



Other comprehensive income for the year
-
-
-



Total comprehensive income for the year
-
(285,053)
(285,053)



Total transactions with owners
-
-
-



At 31 December 2020
-
(307,990)
(307,990)



The notes on pages 26 to 51 form part of these financial statements.

Page 22

 

 
BLOCKCHAIN ACCESS UK LTD


 

STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019



Called up share capital
Profit and loss account
Total equity


$000
$000
$000


At 1 January 2019
-
(5,117)
(5,117)



Comprehensive income for the year


Loss for the year (as restated)

-
(17,820)
(17,820)



Other comprehensive income for the year
-
-
-



Total comprehensive income for the year (as restated)
-
(17,820)
(17,820)



Total transactions with owners
-
-
-



At 31 December 2019
-
(22,937)
(22,937)



The notes on pages 26 to 51 form part of these financial statements.


.





Page 23

 
BLOCKCHAIN ACCESS UK LTD
 

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020

As restated
2020
2019
$000
$000

Cash flows from operating activities

Loss for the financial year
(285,053)
(17,820)

Adjustments for:

Fair value gain on investments
(10,358)
-

Taxation charge
(10)
23

Depreciation of tangible assets
53
9

(Increase)/ decrease in digital assets
(270,103)
(16,367)

(Increase)/decrease in debtors and accrued income
(4,572)
(10,027)

(Increase)/decrease in digital assets receivable
(90,683)
(124,182)

(Increase)/decrease in short term loans recievable
(65,688)
(18,133)

Increase/ (decrease) in custodial assets due
26,222
6,526

Increase/(decrease) in creditors
117,676
6,025

Increase/(decrease) in amounts owed in digital assets
639,463
147,285

Increase/(decrease) in amounts owed to group undertakings
(14,516)
32,329

Net cash generated from operating activities

42,431
5,668


Cash flows from investing activities

Purchase of fixed assets
-
(130)

Purchase of unlisted and other investments
(171)
150

Net cash from investing activities

(171)
20

Cash flows from financing activities

(Decrease)/ increase in funds held on behalf of third-party investors
-
(2,718)

Net cash used in financing activities
-
(2,718)

Net increase in cash and cash equivalents
42,260
2,970

Cash and cash equivalents at beginning of year
6,746
3,776

Cash and cash equivalents at the end of year
49,006
6,746


Cash and cash equivalents at the end of year comprise:

Cash at bank and in hand
16,440
219

Customers deposits held at bank
32,566
6,527

49,006
6,746


Page 24

 
BLOCKCHAIN ACCESS UK LTD
 
The notes on pages 26 to 51 form part of these financial statements.

Page 25

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

1.


General information

Blockchain Access UK Ltd (the “Company”) is a private company limited by shares incorporated in England and Wales under the Companies Act 2006. The Company is a wholly owned subsidiary of Blockchain.com Group Holdings, Inc.  (the “Parent Company”), a company registered in the Cayman Islands. The address of the registered office of the Company is given on the Company Information page. The nature of the Company's operations and principal activities are set out in the Strategic Report.

2.Accounting policies

 
2.1

Basis of preparation of financial statements

The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.

The financial statements have been prepared on a historical cost basis, except where disclosed separately in the accounting policies where certain items are reported using a weighted average cost method (“WAC”). 

 
2.2

Going concern

For the year ended 31 December 2020 the Company had a net loss of $285m (including an impairment expense of $135m), compared to a net loss of $18m in 2019. Total revenue of the Company increased from $173m for the year ended 31 December 2019, to $430m for the year ended 31 December 2020. Additionally, the Company saw an increase in total current assets from $181m in the year ended 31 December 2019 to $683m in the year ended 31 December 2020. The Directors have considered the going concern status taking account of the entity’s financial performance and the following matters/information:

The Company may face future negative impacts to its business and results of operations as a result of ongoing global geo-political events, which includes but is not limited to the conflict between Russia and Ukraine. As at the date these financial statements have been signed, these events have had no observed material adverse impact on the Company’s operations, capital raising ability, or on trading.

The Group, which the Company is a subsidiary of, underwent a significant global operational restructuring (from March 2022 to July 2023), to align with the changing regulatory landscape around the crypto sector. As a result, subsidiaries, other than the Company, now hold the contractual relationships with the Group’s clients, with the Company retaining the intellectual property of the exchange platform, as well as providing infrastructure services to those subsidiaries. The underlying legal agreements supporting these updated inter-company arrangements have short term, albeit market standard, notice periods and may therefore be withdrawn at short notice. It is noted that the infrastructure services are provided on a revenue split based on transactional volume at the rate of 65%. While the Company is integral to this updated global business model, it is also highly dependent on this model continuing in its deployed form and there being no adverse impact on the operations of the wider group which would limit cashflows and potentially limit continued working capital funding by its Parent Company. 

The Directors have obtained, considered and discussed with the directors of the Parent Company the current Group operational performance, together with budgets and cash flow forecasts for the Group covering up to a sixteen month period post approval of the financial statements, as approved by the management of the Parent Company.  Based on these discussions, the Directors note that there will not be any material change in either the business activities of the Parent Company, the Company, nor the capital cost structure. The Directors have also evaluated the sustainability and feasibility of the future plans of the Company and its operating model, in light of the discussions with the Parent Company, which confirmed there was no intention for the Company to cease trading in the
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BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

2.Accounting policies (continued)


2.2
Going concern (continued)

foreseeable future too.

Given the late filing of financial statements with Companies House, the Directors of the Company have received court summonses. The Directors have considered the court summonses they received relating to their failure to submit the Company’s annual accounts to the UK company registrar, Companies House, in respect of its financial year ending 31st December 2022, and the potential uncertainties related to the outcome of this process.  As set out in the Note 2.3 - Laws and Regulations the case being brought is against the Directors rather than the Company and based on the advice received from external legal counsel, the Directors do not believe that there is a risk that court proceedings could be brought against the Company. The Directors are also of the view that there is no consequential impact from the case against the Directors that will impact the ability of the Company to continue as a going concern. The Directors have concluded that, although there is uncertainty in this respect, the uncertainty does not itself have a material impact on the ability of the Company to continue as a going concern. 

The Parent Company has provided working capital assurances in the form of a non-binding letter of support that provides that the necessary funding will be forthcoming if and when it becomes required. The Directors have also concluded that the Parent Company and the Group are in a position to provide this financial support, should it be considered necessary. The non-binding letter of support records the financial support that the Parent Company will provide to ensure that the Company can meet its liabilities as and when they fall due, including any cash shortfalls and working capital needs that may arise for a period of at least 16 months from the date of approval of the Company’s 31 December 2020 Accounts. This is supplemented by a deed poll guarantee dated 22 March 2022, as amended, issued by the Parent Company (the “Parent Guarantee”) pursuant to which the Parent Company guarantees the financial obligations of the Company. The Directors anticipate that this funding, as required, will be forthcoming from the Parent Company. The combination of the non-binding letter of support and the Parent Guarantee will be necessary to ensure that the Company is able to meet its obligations as they fall due.

The Parent Company’s non-binding letter of support has been provided with the full knowledge of the above noted court summons against the Directors of the Company and after considering the potential consequential impact of the court summons against the Directors on to the Company.  

Taking account of the above factors and considering the mitigations to risks to the ability of the Company to continue as a going concern, the Directors believe that the Company, with the Parent Company support, has adequate resources to continue as a going concern for the foreseeable future. This conclusion is based upon the non-binding letter of support, the Parent Guarantee, and the inter-company arrangements in place to support the infrastructure services provided to other subsidiaries and the wider group. 

The financial statements do not include the adjustments that would be required should the going concern basis of preparation no longer be appropriate.

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BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

2.Accounting policies (continued)

  
2.3

Laws and Regulations

The directors of the Company each received a court summons dated 30th May 2024 relating to their failure to submit the Company’s annual financial statements to the UK company registrar, Companies House, in respect of its financial year ending 31st December 2022 in accordance with section 441 and 442 of the England & Wales Companies Act 2006. A case management hearing is currently scheduled for 26th November 2024. The directors are working with their legal advisers to defend the matter.  Based on legal advice received from the Company’s external legal counsel, the Directors do not believe there is any potential impact to the Company directly because of the court summonses received by the Directors.  The directors are not aware that any action is being taken against the Company at this time related to the late filing of its annual financial statements.  The Directors are also confident that there is no direct impact on the Company as a result of the court summonses received by the Directors anticipated in the foreseeable future, based on the external legal advice received.

The reasons that the directors of the Company are late submitting the financial statements are the result of two key challenges faced by themselves and impacting the Directors and the Company’s finance function.  The first being the need to restructure the wider Blockchain group’s business model as a result of the Financial Conduct Authority’s (‘FCA’) implementation of certain key regulations that were unforeseeable by the Company.  Secondly, the well-documented 2022 crypto sector market collapse had significant consequences for the Company, including a significant reduction in the wider group’s workforce.  This had a significant impact on management, administrative and finance functions’ time and availability, which has taken a period of time to stabilise and ensure that the required resources are in place.

This non-compliance does not have an impact on the Company’s financial position and performance as at 31 December 2020.  The Directors of the Company and the Parent Company are fully committed to remediate the Company’s compliance with respect to all statutory annual filings of the Company. As part of their commitment, the Directors are taking appropriate steps to remediate the Company's compliance with all statutory annual filing requirements as efficiently as possible.  The steps that have been or will be put in place include:

-   Recruiting additional appropriately qualified members of staff in the accounting function to
    provide the capacity and skills to prepare their financial statements and underlying books and
    records to be audited;
-   Engaging an external professional accounting firm to further enhance the Company’s accounting
    functions;
-   Establishing specific cross-functional groups within the Company, including the Directors, to 
    prioritise, oversee and assign ownership of responsibilities to expedite the remediation process;
-   Establishing a dedicated Company Secretarial function with the responsibility for corporate
    governance matters across the wider group, including the Company;
-   Actively engaging with the Company’s external auditors regarding the completion of the audits for
    future years;
 
Should the Directors need to take additional action above those already in place, such as further recruitment, appointment of additional directors to provide greater capacity to support the working groups or expanding the scope of the external professional accounting firm’s project, they will do so.

There is a possibility that separate direct action may be taken against the Company directly as a result of the failure to submit financial statements to Companies House in the future.  Based on legal advice received, the directors believe that this is unlikely, given the steps put in place, and the plans to continue to operate the business on the existing operating model for the foreseeable future.

However, the remediation process may take longer than the Directors anticipate, given the
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BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

2.Accounting policies (continued)

complexities in the business and the length of time that an audit of each year may take.  Should further delays occur, this could cause further uncertainty over the potential actions Companies House could take against the Directors. This may result in further unforeseen actions against the Directors.

  
2.4

Functional currency and foreign currency transactions

The Company’s financial statements are presented in US Dollars, or USD, which is also the Company’s functional currency as this is the currency used in the primary economic environment in which the Company operates. Foreign currency transactions are translated at the rates ruling when they occurred. Foreign currency monetary assets and liabilities are translated at the rates ruling at the balance sheet dates. Foreign exchange gains and losses are recognised in the Statement of Comprehensive Income, in other operating (expense)/ income.

 
2.5

Revenue

The Company primarily derives its revenues from digital asset transaction services, where users can buy, sell, and swap digital assets for a service fee. The Company recognises revenue when the: outcome of a transaction can be estimated reliably when all the following conditions are satisfied: (a) the amount of revenue can be measured reliably; (b) it is probable that the economic benefits associated with the transaction will flow to the entity; (c) the stage of completion of the transaction at the end of the reporting period can be measured reliably; and; (d) the costs incurred for the transaction and the costs to complete the transaction can be measured reliably. Where the amount of revenue is contingent on future events, this is only recognised where the amount of revenue can be measured reliably and it its probable that the economic benefits will be received.

Service is considered rendered upon purchase and transfer of digital asset(s) or fiat currency to the customer. The company defers any funds received in advance of successful completion of the recognition criteria. The Company also provides fiat and digital assets loans to customers. The Company earns lending fees on these loans. The lending fee is recognised on an accrued basis. The Company derives revenue from contracts with customers principally from the Exchange, digital asset lending, swap, and OTC trading services provided to customers, as described below.


Exchange revenue

The Company operates a crypto currency trading platform that allows both institutional and retail customers to buy, sell and swap crypto currency with fiat and other crypto currency. Contracts with Exchange customers are open ended and can be terminated by either party at any time without a termination penalty. Therefore, contracts are defined at the transaction level and do not extend beyond the services related to the specific transaction. The Company’s promise to Exchange customers is: 1) to provide a trade matching service when an order is placed by a customer, and 2) to fulfil the customer order by delivering crypto currency.  These promises combine to form one performance obligation. Revenue is recognised at the point in time when the trade is executed.

For the majority of Exchange transactions, the Company’s role is to match customers who are buying and selling crypto currency on the Exchange and facilitate the delivery of crypto currency from the seller to the buyer. For the transactions in which the Company is fulfilling the customer order, judgment is required in determining whether the Company is the principal or the agent in fulfilling the customer order, based on whether the Company controls the crypto currency before it is transferred to the buyer. The Company concluded it does not control the crypto currency in Exchange transactions as, (1) the seller remains the beneficial owner of the crypto currency until the transaction is executed, and (2) the Company does not have the ability to direct the use of the crypto currency in customers’ accounts. As part of our evaluation of control, the Company also reviewed other specific indicators of control to support our conclusion, including that the Company is not primarily
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BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

2.Accounting policies (continued)


2.5
Revenue (continued)

responsible for delivering the crypto currency to the buyer, nor does the Company bear any inventory risk before or after the crypto currency is delivered to the buyer. The Company also does not have discretion in establishing the settlement price for the crypto currency, which is determined by the market exchange rate on the Exchange. As a result, the Company acts as the agent in fulfilling the customer order for these transactions and recognises the related revenue on a net basis.

For transactions where the Company acts as the counterparty to the customers by fulfilling the orders from the Company’s own inventory, no third party is involved in delivering crypto currency to the customer and therefore, the Company has concluded it is acting as a principal to fulfilling crypto sale trades. As a result, the Company recognises revenue from these transactions on a gross basis.


Swap

The Company provides swap services that allow retail customers to convert one crypto currency to another. Contracts for swap services are defined at the transaction level and do not extend beyond the service related to the specific transaction. Each crypto currency conversion is considered a single performance obligation. All swap transactions are fulfilled by the Company from its own inventory with no third party involved. As a result, the Company recognises revenue from these transactions on a gross basis. The Company recognises the total fair value of crypto currency received as revenue at the point in time the transaction is executed. The cost of the crypto currency used to fulfil the customer order is accounted for as cost of sales.


OTC trading revenue

In addition, the Company enters into crypto currency sale agreements with institutional customers through its OTC trading desk. Similar to swap services, contracts for OTC trading services are defined at the transaction level. For each transaction, the Company has a single performance obligation to price, source, settle and ultimately, transfer crypto to the customer. The Company always has custody and control of the crypto currency prior to sale to the customer through the OTC desk. The Company recognises OTC sales on a gross basis, with revenue recognised at the point in time the transaction is executed. The cost of the crypto currency used to fulfil the OTC order is accounted for as cost of sales.


Lending fee revenue

The Company provides lending facilities in fiat and digital assets to customers and earns a lending fee, which is accrued daily as revenue based on a contractual fee percentage of the outstanding balance. The fee is collected in arrears on a weekly, monthly or quarterly basis or at maturity. These contracts may be open ended or have a fixed term, but they are all considered day to day for accounting purposes, as contracts can be terminated by either party at any time without incurring a substantive penalty. Lending is considered a series of transactions, of daily events satisfied over time, as customers simultaneously receive and consume the benefits of the lending service on a daily basis. The Company recognises revenue daily based on the fair value of the daily fee calculation.


Trading revenue

Other revenue includes gains and losses on trading activity on third party exchanges. The Company recognises realised gains from digital assets sales on a gross basis, when such digital assets are not
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BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

2.Accounting policies (continued)


2.5
Revenue (continued)

considered financial instruments and are accounted for as inventory, consistent with the revenue standard. The Company acts as a principal in these transactions which requires gross treatment for revenue and for corresponding costs. As a principal, the Company has control over the digital asset before it is transferred to the customer.

  
2.6

Taxation

The tax expense for the year comprises current and deferred tax. Tax is recognised in profit or loss except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.

The  current  income  tax  charge  is  calculated  on  the  basis  of  tax  rates  and  laws  that  have  been enacted or substantively enacted  by the balance sheet date in the countries where the Company operates and generates income.

Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the Balance Sheet date, except that:

The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and

Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.

Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values  of  liabilities  acquired  and  the  amount  that  will  be  assessed  for  tax.  Deferred tax  is determined  using  tax rates and laws that have been enacted or substantively  enacted  by  the balance sheet date.

Tax is recognised in profit or loss except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.

The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the Company operates and generates income.

Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the Balance Sheet date, except that:
The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and
• Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.


Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined
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BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

2.Accounting policies (continued)

using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

 
2.7

Tangible fixed assets

Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.

Depreciation is provided on the following basis:

Computer equipment
-
33%

The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.

 
2.8

Investments

In the ordinary course of business, the Company invests excess cash in institutional funds managed by a third party. Additionally, during the period, the Company invested in certain digital assets index funds. The investments in funds are treated as an equity security, reported at fair value, and unrealized gains and losses are reported in Unrealized gain on investments on the Statements of Comprehensive Income.

  
2.9

Cash and cash equivalents

Cash and cash equivalents within the Balance Sheet include cash held at bank and third party crypto exchanges. For the purpose of the Statement of Cash Flows, cash and cash equivalents includes cash held at bank and in hand and customer deposits held at bank.

 
2.10

Digital assets

Digital assets primarily comprises of crypto currency and other digital assets. The Company transacts with certain crypto currencies and other digital assets, which include, but not limited to, Bitcoin, Ethereum and Bitcoin Cash.

All crypto currency and other digital assets are classified as inventory. At inception, crypto currency and other digital assets are recorded at the fair value as of that date. Subsequently these assets are measured using the weighted average cost method. At the reporting date these assets are measured at the lower of cost and net realisable value. The estimated net realisable value of crypto currency assets are derived from www.coinmarketcap.com.

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BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

2.Accounting policies (continued)

  
2.11

Loans receivable

The Company provides lending facilities in government issued currency ('fiat') to customers and earns a lending fee. Loans are initially recognised at fair value, which is the cash given to originate the loan, net of transaction costs and subsequently measured at amortised cost, less any impairment charges. Fiat loans may be collateralised by digital assets, and the Company may have rehypothecation rights over the digital assets posted as collateral. When digital assets are initially received as collateral they are not recognised as an asset by the Company, in line with the requirements of FRS 102, section 11.35.  Once the collateral received has been rehypothecated, lent or sold, as permitted by the terms of the agreement, the Company records the proceeds from the transaction with a corresponding collateral payable liability representing the Company’s obligation to return the collateral to the counterparty.

  
2.12

Other debtors

Other debtors include amounts that are due within one year. Amounts that are due within one year primarily comprise lease prepayments and other receivables. These balances are carried at cost less any impairment provision.  

  
2.13

Customer deposits held at bank and custodial funds deposits due to customers

Customer deposits held at banks represent customer fiat funds deposited into their exchange accounts. Customer deposits held at bank are restricted for use by the respective customers on the Exchange. The Company operates a number of deposit bank accounts and stores funds for customers in multiple currencies to allow them to facilitate transactions in a timely manner. Deposits are maintained at financial institutions in Europe, the US and other countries. Custodial cash deposits held at bank are presented as cash in the Statement of Cash Flows.

Custodial funds due to customers represent the corresponding liability related to customer deposits.

  
2.14

Other creditors

Other creditors include amounts falling due within one year and comprise of advances received as well as amounts due to various service providers, value added tax payable and accrued expenses. These balances are carried at cost.

  
2.15

Digital assets lent to customers

Digital assets lent comprise crypto currency assets that are being loaned or pledged in relation to the Company’s crypto lending and borrowing business. These digital assets are classified as inventory.  At inception these assets are recorded at transaction price. 
 
The Company regularly and at least at each reporting date assesses whether its crypto currency and other digital assets are impaired by comparing the carrying amount of each crypto currency and other digital asset to its estimated net realisable value. At the reporting date these assets are measured at the lower of cost or lowest fair market value within the current quarter derived from www.coinmarketcap.com.

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BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

2.Accounting policies (continued)

  
2.16

Amounts owed in digital assets

Amounts owed in digital assets comprises of amounts held on behalf of third-party investors and amounts owed on the Company's lending business, including digital assets borrowings and collateral payable to third parties in digital assets. These balances are carried at the amounts that are equal to the best estimate of the amount that would be required to settle the obligation as of the reporting date, which approximates the fair value. Fair value is derived from www.coinmarketcap.com. Interest expense on amount owed in digital assets is included in cost of sales.
 
  
2.17

Critical accounting judgements and estimates

The Company’s critical accounting judgements and estimates include the following:

• Impairment of Non Financial Assets: The Company assesses impairment of non financial assets, including digital assets, regularly and at least on each reporting date by evaluating conditions specific to the Company and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined, which is primarily based on an observable fair value of an asset less cost of disposal, if any, and incorporates a number of key estimates and assumptions.

• Impairment of Financial Assets: Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for impairment. If evidence of impairment is found, an impairment loss is recognised in Other operating expenses. The impairment loss for these financial assets  is measured as the difference between the asset’s carrying amount and the present value of estimated cash flows discounted at the asset’s original effective interest rate, which incorporate a number of key estimates and assumptions.

The impairment loss for financial assets measured at amortised cost is measured as the difference between the asset’s carrying amount and the present value of estimated cash flows discounted at the asset’s original effective interest rate. 

For financial assets measured at cost less impairment, the impairment loss is measured as the difference between the asset’s carrying amount and best estimate of the recoverable amount, based on the Company’s estimate of the amount it would receive for the asset if it was sold as of the balance sheet date.

Amounts owed in digital assets - collateral payable: The Company receives digital assets as collateral for digital assets lent. When digital assets are initially received as collateral they are not recognised as an asset by the Company, in line with the requirements of FRS 102, section 11.35. Once the collateral received has been rehypothecated, lent or sold, as permitted by the terms of the agreement, the Company records the proceeds from the transaction with a corresponding collateral payable, measured at fair value, representing the Company's obligation to return the collateral to the counterparty.

 AirDrop transaction with the Stellar Foundation: The Company accounts for Stellar coins it received under the airdrop transaction with the Stellar Foundation as intangible assets and estimated their initial value at Nil since no consideration was paid for these coins. The Company estimated the corresponding liability at Nil since the estimated value of the airdrop coins received was Nil.

In 2018 Blockchain Access UK Ltd received 509,916,861 Stellar coins at fair value of $126,973,888 from the Stellar Foundation to distribute to Blockchain’s wallet holders. As of 31 December 2018, the Company had distributed 12,335,208 Stellar coins at a fair market value of $3,071,578 to Blockchain wallet holders. During the year ending 31 December 2019, the Company had distributed 367,873,405 Stellar coins at a fair market value of $39,779,255 to Blockchain wallet holders and held the
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BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

2.Accounting policies (continued)

remaining balance of 127,963,572 Stellar coins at fair value of $5,786,513 in its crypto wallet.  As of May 2020, 127,825,360 of the undistributed Stellar coins were returned to the Stellar Foundation in 2020.

 Exchange transactions: For the majority of Exchange transactions, the Company’s role is to match customers who are buying and selling crypto currency on the Exchange and facilitate the delivery of crypto currency from the seller to the buyer. For the transactions in which the Company is fulfilling the customer order, judgment is required in determining whether the Company is the principal or the agent in fulfilling the customer order, based on whether the Company controls the crypto currency before it is transferred to the buyer. The Company concluded it does not control the crypto currency in Exchange transactions as, (1) the seller remains the beneficial owner of the crypto currency until the transaction is executed, and (2) the Company does not have the ability to direct the use of the crypto currency in customers’ accounts. As part of our evaluation of control, the Company also reviewed other specific indicators of control to support our conclusion, including that the Company is not primarily responsible for delivering the crypto currency to the buyer, nor does the Company bear any inventory risk before or after the crypto currency is delivered to the buyer. The Company also does not have discretion in establishing the settlement price for the crypto currency, which is determined by the market exchange rate on the Exchange. As a result, the Company acts as the agent in fulfilling the customer order for these transactions and recognises the related revenue on a net basis. For transactions where the Company acts as the counterparty to the customers by fulfilling the orders from the Company’s own inventory, no third party is involved in delivering crypto currency to the customer and therefore, the Company has concluded it is acting as a principal to fulfilling crypto sale trades. As a result, the Company recognises revenue from these transactions on a gross basis.

Customer deposits held at bank: Customer deposits held at bank represent restricted cash and cash equivalents maintained in segregated Company bank accounts that are held for the exclusive benefit of customers. The Company restricts the use of the customer deposits held at bank to meet regulatory requirements and classifies the assets as current based on their purpose and availability.

  
2.18

Financial instruments

A financial asset or a financial liability is recognised when the Company becomes a party to the contractual provisions of the instrument.

Financial instruments include cash and cash equivalents, other debtors, including amounts owed by group undertakings, other creditors and amounts owed to group undertakings, are initially recognised at the transaction price, unless the arrangement constitutes a financing transaction, where it is recognised at the present value of the future payments discounted at a market rate of interest for a similar debt instrument.

In the ordinary course of business, the Company enters into over-the-counter put and call digital assets option contracts with institutional clients where the underlying instruments are digital assets. When the Company pays an option premium, it has the right (not the obligation) to purchase or sell a specified number of digital asset units at the strike price on the expiration date. When the Company receives an option premium, it has the obligation to purchase or sell a specified number of digital asset units at the strike price on the expiration date. These option contracts qualify as derivatives and are recognized at fair value within other assets or other liabilities on the Balance Sheet. The Company considers the fair value of an option contract at initial recognition to equal the transaction price, i.e. the upfront premium paid. If an option is exercised, the difference between the premium and the fair value of digital asset units received or paid is recorded as realized loss (gain) on embedded derivatives on digital asset trading options, and when an option expires unexercised, the premium is recorded as a realized gain or loss within realized loss (gain) on embedded derivatives on digital liabilities and digital asset trading options.
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BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

2.Accounting policies (continued)


The Company does not use any of its derivative contracts as hedging instruments and changes in fair value of all derivative contracts described above are recognized in Operating expenses within Unrealized loss (gain) on embedded derivatives on digital liabilities and digital asset trading options on the Statements of Comprehensive Income.

Financial liabilities and equity are classified according to the substance of the financial instrument’s contractual obligations, rather than its legal form.

  
2.19

Amounts due from and owed to group undertakings

Amounts due from and owed to group undertakings arise from transactions between the Company and other group companies. These receivables and payables do not bear any interest and are payable on demand. Amounts due from group undertakings are included in Other Debtors in the Company’s balance sheet. Amounts owed to group undertakings are included in Other Creditors – amounts falling due within one year in the Company’s balance sheet.

  
2.20

Share capital

The Company’s ordinary shares are classified as equity.

  
2.21

Gains and losses on sales of digital assets

The Company recognises realised gains from digital assets sales on a gross basis, when such digital assets are not considered financial instruments and are accounted for as inventory, consistent with the Company’s revenue policy. The Company acts as a principal in these transactions which requires gross treatment for revenue and for corresponding costs. As a principal, the Company has control over the digital asset before it is transferred to the customer. The Company recognises the gross amount of cash or total fair value of crypto currency received as revenue at the point in time the transaction is executed. The cost of the crypto currency used, or cash paid to fulfil the customer order is accounted for as cost of sales. Unrealised gains and losses on amounts owed in digital assets consisted of the Company’s digital assets borrowed, digital assets collateral payable, digital assets interest earning accounts payable and other payables in digital assets. Such unrealised gains or losses are accounted for at fair value, in Other operating income. Upon settlement of the amounts owed in digital assets, the unrealised gains or losses are recorded as realised.  
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BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

3.


Revenue

An analysis of turnover by class of business is as follows:


2020
2019
$000
$000




OTC Revenue
150,548
48,950

Swap Revenue
166,832
112,026

Exchange Revenue
73,239
5,939

Lending Fee Revenue
19,639
1,356

Trading Revenue
19,360
5,184

429,618
173,455


2020
2019
$000
$000

United Kingdom
102,873
14,776

Europe
184,697
86,042

Rest of World
142,048
72,637

429,618
173,455



4.


Other operating (expense)/ income

2020
2019
$000
$000


Unrealised loss/ (gain) from digital assets
320,681
(18,045)

Realised gain from digital assets
(71,924)
(9,268)

Loss/ (gain) from foreign currency exchange
348
(176)

Interest income
(70)
-

249,035
(27,489)


Page 37

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

5.


Operating loss

The operating loss is stated after charging:

2020
2019
$000
$000

Exchange differences
348
(176)

Intercompany recharges
20,308
20,965

Impairment charges for digital assets and digital assets lent
134,820
60,955

Depreciation - computer equipment
53
9

Fair value gain on investments
10,358
-

Unrealised gain on derivative assets
2,977
-

Realised gain on derivative assets
2,917
-


6.


Auditors' remuneration

During the year, the Company obtained the following services from the Company's auditors and their associates:


2020
2019
$000
$000

Fees payable to the Company's auditors and their associates for the audit of the Company's financial statements
580
230

Fees payable to the Company's auditors and their associates in respect of:

All non-audit services not included above
160
-


7.


Employees and directors




The average monthly number of employees, including the directors, during the year was as follows:


        2020
        2019
            No.
            No.







Employees
2
2

There were no staff costs during the year. The Company's Directors were remunerated by another group Company. Total directors' remuneration allocated to the Company for services provided, including intercompany recharges, is $803k (2019: $484k).

Page 38

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

8.


Taxation



Factors affecting tax charge for the year

The tax assessed for the year is higher than (2019 - higher than) the standard rate of corporation tax in the UK of 19% (2019 - 19%). The differences are explained below:

2020
2019
$000
$000


Loss on ordinary activities before tax
(285,063)
(17,797)


Tax adjusted trading loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% (2019 - 19%)
(54,162)
(3,381)

Effects of:


Deferred tax unrealised
54,152
3,404

Total tax charge/ (credit) for the period
(10)
23

The Company has a potential deferred tax asset of $54.1m (2019: $nil) on trading losses of $285m. The potential deferred tax asset is unrecognised until it becomes probable that there will be future taxable profit available for offset.

The Chancellor of the Exchequer announced in the Budget of 11 March 2020 that the previously planned reduction in the UK corporation tax rate from 19% to 17% would no longer take place, and the rate would remain at 19%. As such, all deferred tax items on the financial statements for the year ended 31 December 2020 have been reflected with the corporate tax rate of 19%.

Page 39

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

9.

Tangible fixed assets


2020
2019

$000
$000

Cost

At 1 January 
130
-

Additions
-
130

At 31 December
130
130


Accumulated depreciation

At 1 January 
(9)
-

Charge for the year on owned assets
(53)
(9)

At 31 December
(62)
(9)

-


Net Book Value
68
121


10.


Fixed asset investments

2020
2019
$000
$000


At 1 January 2020
-
-

Unlisted investment additions
4,955
-

Fair value adjustment
10,358
-

At 31 December 2020
15,313
-


In 2020, the Company made an investment of $4.96m in an unlisted private company. This investment formed part of a larger investment by the Group. At 31 December 2020, In conjunction with warrants issued of $171k, the fair market value of investments was $15.3m. In 2019, the Company did not hold any investment at the year end.

Page 40

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

11.


Digital assets

2020
As restated
2019
$000
$000



Digital assets held for sale
325,301
55,904

Impairment charge
(52,826)
(25,824)

Net book value
272,475
30,080

Digital assets primarily comprise crypto currency assets, including but not limited to Bitcoin, Bitcoin Cash Stellar, Ethereum and USDT. As at 31 December 2020, the fair value of digital assets was $272.5m (2019 - $30.1m). Digital Assets totaling $2.2m were pledged as collateral for borrowings the company has received as at 31 December 2020 (2019 - $74.5m). Digital assets pledged as collateral are generally calculated as a percentage of the borrowed amount, if during the term of the loan the borrowed amount increases, the Company may be required to pledge additional collateral. Upon repayment of the borrowed amount, the collateral pledged is returned to the Company.


12.


Digital assets lent to customers

2020
As restated
2019
$000
$000


Short term crypto loan receivable cost
400,488
142,019

Crypto loan receivable impairment
(187,199)
(22,808)

Net book value
213,289
119,211


Page 41

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
12.   Digital assets lent to customers (continued)

Crypto loans receivables net of impairment consist of $213.3m (2019: $119.2m) loans that can be called on demand, or are due within one year, and no (2019: $6.6m) crypto loans that have a maturity date that is greater than 1 year but within 2 years. The following table presents the amounts of crypto loans receivable by the remaining contractual maturity:
 

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ole181e.png
 
Page 42

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

13.


Short term and long term loans receivable




Loans receivables net of impairment consist of $83.8m (2019: $15.4m) loans that can be called on demand, or are due within one year, and $0 (2019: $2.7m) of the loans that has a maturity date that is greater than 1 year. The following table presents the amounts of crypto loans receivable by the remaining contractual maturity:
 
ole48a2.png

14.


Debtors

2020
As restated
2019
      $000
      $000

Amounts owed by group companies

44,108

9,564

Other debtors

4

97

Prepayments and accrued income

5,067

402


49,179

10,063




15.


Creditors: Amounts falling due within one year

2020
As restated
2019
$000
$000



Loan Payables
-
(2,250)

Accruals and deferred income
(116,290)
(1,780)

Trade creditors
(6,310)
(3,184)

Crypto borrowings and collateral payable
(758,496)
(119,164)

Amount owed to group entities
(61,726)
(41,698)

Payables in digital assets
(248)
(248)
Page 43

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

Custodial funds due to customers
(32,749)
(6,527)

(975,819)
(174,851)

Loan payables consist of loans which are denominated in US Dollars, and are carried at fair value. These loans can be called on demand, or are due within one year. The range of interest rates for these loans is between 0% and 2%. The following table presents the amounts of loan payables by remaining contractual maturity:
ole38bb.png
Page 44

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

16.


Creditors: Amounts falling due after more than one year

2020
As restated
2019
$000
$000

Crypto borrowings and collateral payable
(30,937)
(39,046)

Deferred Tax Liability
(13)
(23)

(30,950)
(39,069)


Page 45

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

16.Creditors: Amounts falling due after more than one year (continued)

Crypto borrowings and collateral payable balances are carried at the amounts that are equal to the best estimate of the amount that would be required to settle the obligation as of the reporting date, which approximates the fair value, which is derived from www.coinmarketcap.com. The range of interest rates for these loans is between 0% and 18%. The following table presents the amounts of crypto borrowing and collateral payable by the remaining contractual maturity:

ole7375.png
ole3265.png
Page 46

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

17.


Financial instruments

2020
As restated
2019
$000
$000

Financial assets


Cash
16,440
219

Customer deposits held at bank
32,566
6,527

Loans receivable
83,821
18,133

Derivative assets
15,628
-

Amounts owed by group companies
44,108
9,564

Other debtors
4
97

Prepayments and accrued income
5,067
402

197,634
34,942


Financial liabilities


Amounts owed to group entities
(61,727)
(36,599)

Loan Payables
-
(2,250)

Trade creditors
(6,310)
(3,184)

Accrued expenses
(116,290)
(1,780)

Custodial cash deposits due to customers
(32,749)
(6,527)

(217,076)
(50,340)


Financial instruments include cash and cash equivalents, other debtors, including amounts owed by group undertakings, other creditors and amounts owed to group undertakings, are initially recognised at the transaction price, unless the arrangement constitutes a financing transaction, where it is recognised at the present value of the future payments discounted at a market rate of interest for a similar debt instrument.

The Company held $15.6m in derivative financial assets at 31 December 2020. An unrealised gain of $2.98m and realised gain of $2.92m was recognised in the Statement of Comprehensive Income.

Page 47

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

18.


Analysis of net debt

At 1 January 2020
Cash flows
At 31 December 2020
      $000
      $000
      $000

Cash at bank and in hand

219

16,221

16,440
 
Customers deposits held at bank

6,527

26,039

32,566
 
Debt due within 1 year

(168,324)

(774,746)

(943,070)
 
Debt due more than 1 year

(39,047)

8,110

(30,937)
 

(200,625)

(724,376)

(925,001)
 




19.


Share capital

2020
2019
$000
$000
Allotted, called up and fully paid



1 (2019 - 100) Ordinary share of $0.01
-
-

The Company's called up share capital consists of one ordinary share with a par value of $0.013 (£0.01) that is fully owned by the Parent. 


Page 48

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

20.


Related party transactions

Due to its 100% shareholding in the issued share capital of the Company, the immediate parent undertaking is Blockchain.com Group Holdings, Inc. (formerly known as Blockchain Luxembourg S.A).

In 2020, the Company executed transactions with related parties, which included key management personnel and related parties with significant influence over the Company.

Key management personnel include all directors and certain senior managers across the group who together have the authority and responsibility for planning, directing, and controlling the activities of the group. No key management personnel received remuneration from the company during the year (2019:  $nil). For directors' renumeration refer to Note 6. The Company has taken advantage of the disclosure exemption under Section 33.1A of FRS 102 not to disclose transactions with other wholly owned members of the Group.

In addition to compensation paid, transactions with key management personnel primarily comprised of over the counter (OTC), Exchange sales and purchases of digital assets. Included in revenue is $148k and $736k for the years ended December 31, 2020 and December 31, 2019, respectively. Custodial funds held on behalf of related parties were $248k as at December 31, 2020 and nil as at December 31, 2019. These were included within payables to third party investors for crypto assets held as at 31 December 2020.

During the reporting period related parties with significant influence sold to, and purchased from, the Company digital assets totaling $63m (2019: $29.7m). Loans receivable include loans to related parties of $2.5 million, and nil, for the years ended December 31, 2020 and December 31, 2019 respectively. Digital assets lent include digital assets lent to related parties of $24.4 million, and $nil, for the years ended December 31, 2020 and December 31, 2019 respectively.


21.


Post balance sheet events

In accordance with accounting standards affecting disclosures of subsequent events, the Company evaluated subsequent events for recognition and disclosure to 8 October 2024, the date at which these financial statements were available to be issued. Management concluded that, other than those noted below, no material subsequent events have occurred since 31 December 2020 that require recognition or disclosure in the financial statements.

In April 2021, the Company engaged in an asset purchase of the business, goodwill, intellectual property, software and IT systems of AI Exchange LTD., a company that has built an AI-powered negotiation and matching engine for institutional OTC traders. As a consideration for the acquisition, the parent company issued warrants valued around $1.6m to AI Exchange LTD.

On 22 October 2021, the Board and shareholders of Blockchain Luxembourg S.A. approved the migration of the parent company to the Cayman Islands, which was carried out by way of a continuation of the legal entity. The renamed entity was deregistered from Luxembourg and reregistered with the Cayman Islands Companies Registry on 25 October 2021 in the name of Blockchain.com Group Holdings, Inc.

In February 2022, the Company underwent a global restructuring to align with the changing regulatory landscape in crypto. Beginning in March 2022 and ending in July 2023, the Company restructured its activities. The result being Group subsidiaries abroad housing contractual relationships with clients, while the Company retained the intellectual property of the digital platform to continue to provide infrastructure services to those subsidiaries.

Three Arrows Capital (3AC), a Singapore-based hedge fund, filed for bankruptcy in July 2022. The Company incurred a loss as a result of lending to 3AC which was ultimately recognized by the 3AC joint liquidators in the bankruptcy estate at $639,593,557. The Company sold a portion of the claim in order to
Page 49

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

21.Post balance sheet events (continued)

recoup some of the loss. The Company remains a creditor in the insolvency estate.

In November 2022, FTX, a Bahamas-based cryptocurrency exchange, filed for bankruptcy. FTX was a leading centralised cryptocurrency exchange specializing in derivatives and leveraged products. The Group’s loss position amounted to $3,664,872.76 and was borne by the Company's affiliated entity, located in Singapore. On 31 March 2023, the Group assigned its claims against FTX to a credit company for an aggregate amount of $549,730.93. The financial impact on the Company was immaterial, at around $24,000.

March 2023 saw the collapse of Silvergate and Signature Bank. The Company. moved all funds held at banks affected by these closures and did not incur any losses.

An agreement with Griid Infrastructure LLC came to an end in June 2024, when the Company agreed to a full release of debt, security interests and other claims to the value of $68m inclusive of $10.8m of interest. The settlement was reached under the Griid Credit Agreement at a substantial discount, with the Company receiving $15m as full and final consideration for the release of all obligations under the agreement.

The Directors of the Company each received a court summons dated 30th May 2024 relating to the Company’s failure to submit its accounts to Companies House in respect of its financial year ending 31st December 2022. A case management hearing is currently scheduled for 26th November 2024. The directors are working with their legal advisers to defend the matter. See Note 2.3 for further details.

In July 2024, Celsius Network LLC, et al (post-effective date debtors) filed an action against the Company in the United States Bankruptcy Court, Southern District of New York seeking recovery of purported avoidable transfers and purported unauthorized setoffs. The Company disputes the claims and intends to vigorously defend against them.


22.


Controlling party

The immediate and ultimate parent company and controlling party is Blockchain.com Group Holdings, Inc. (formerly known as Blockchain Luxembourg S.A.). The address of the registered office of the Company is 190 Elgin Avenue, George Town, Grand Cayman, KY1-9008, Cayman Islands. See note 21 for change in the parent company in October of 2021.

Page 50

 
BLOCKCHAIN ACCESS UK LTD
 
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020

23.


Prior year adjustment



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Page 51