How SBRM Enables Digital Asset White Paper Compliance Under the EU's MiCA Regulations

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The Object Management Group® (OMG®) forthcoming Standard Business Report Model (SBRM) was conceived in part to facilitate digital financial reporting, and it is already at work in a new platform for creating machine-readable crypto asset "white papers" in Inline XBRL (iXBRL) under the Markets in Crypto Assets (MiCA) regulation in the European Union (EU). Automating the digitization of white papers, which are legal documents very much like US securities registration forms, represents a significant advancement in regulatory reporting. SBRM's robust framework enhances the efficiency, accuracy, and transparency of financial reporting, benefiting each of organizations, regulators and investors.

OMG member Auditchain Labs AG has built SBRM into its soon-to-launch Pacioli.aiTM, which is the world's first web3 crypto asset disclosure protocol. The Luca SuiteTM, is Auditchain's SBRM-based disclosure management system for crypto assets as well as financial disclosure creation. Together, they are the payoff for the time and innovation that Auditchain Labs staff have invested in the development of SBRM, going back to its conception. (Note for non-accountants: Luca Pacioli was credited with the introduction of double-entry accounting, back in the 15th century.)

Understanding SBRM and iXBRL

SBRM, as being specified by the Object Management Group (OMG), is a multi data structure interchange specification designed to apply logical models to the reporting process for business and regulatory report creation and validation. SBRM allows non-technical users to define the structure of reports in a logical, conceptual manner that can be utilized in various technical formats, including the eXtensible Business Reporting Language (XBRL), a widely accepted standard for business information exchange.
iXBRL, a more advanced form of XBRL, embeds structured XBRL data within an HTML document, making it both human-readable and machine-readable. This dual capability is crucial for the transparency and usability of financial and non financial reports, as it allows stakeholders to easily access and interpret data while ensuring that the information can be automatically processed and analyzed by regulatory systems.

Benefits of SBRM for Meeting MiCA Requirements

The MiCA regulation, aimed at establishing a framework for crypto assets in the EU, demands rigorous transparency and reporting standards. SBRM addresses these requirements effectively by providing the following benefits:

Enhanced Data Accuracy and Consistency
SBRM ensures that the data reported is accurate and consistent across different submissions and reporting periods. In addition, implementation of SBRM enables verification of consistency of the same facts used in different sections of the same report. By using standardized models and ontologies, SBRM eliminates discrepancies and errors that typically arise from manual data entry and varied reporting formats. This consistency is vital for complying with MiCA's stringent reporting standards.
Automated Report and White Paper Generation, Validation, and Updating
SBRM facilitates the automation of white paper generation and validation. Under MiCA, the white paper is a comprehensive disclosure for crypto assets that includes financial disclosure by certain service providers that must also contribute content to the instance document, similar to registration statements filed with the SEC in the United States. By defining report structures and rules at a high level, crypto asset issuers and service providers can create machine-readable white papers without needing technical expertise. This automation reduces the time and effort required to produce compliant white papers, enabling faster and more efficient submission processes. Updating a white paper, which is required under MiCA when changes occur to the crypto asset project, is as easy as entering the relevant updated content in the relevant section of the disclosure using Luca SuiteTM and outputting the white paper in iXBRL in a single click.
Interoperability with Existing Standards
SBRM's compatibility with existing standards like XBRL, JSON, RDF (Resource Description Framework) or even Excel ensures that it can be seamlessly integrated with current reporting systems and technologies. This interoperability is crucial for organizations that need to adapt their existing infrastructure to meet MiCA requirements without extensive overhauls.

Benefits for Regulators

Regulators stand to gain significantly from the adoption of SBRM for iXBRL reporting under MiCA. The primary benefits include:

Improved Data Validation and Compliance Monitoring
SBRM's structured approach allows regulators to automate the validation of submitted reports. By applying predefined rules and patterns, regulatory bodies can quickly identify inconsistencies, errors, and non-compliance issues within the reports. This capability enhances the oversight and enforcement of MiCA regulations, ensuring that all entities comply with the required standards.
Streamlined Data Analysis and Reporting
The machine-readable format of SBRM reports enables regulators to efficiently analyze large volumes of data. Advanced analytics tools can process iXBRL data to generate insights, trends, and patterns, facilitating more informed decision-making and policy development. This streamlined data analysis capability is essential for monitoring the dynamic and rapidly evolving crypto asset market.
Enhanced Transparency and Accountability
By providing a clear and consistent framework for reporting, SBRM enhances transparency and accountability within the crypto assets market. Regulators can ensure that all market participants are reporting information in a uniform manner, making it easier to compare and contrast data across different entities and reporting periods. This transparency is crucial for building trust and confidence in the market.

Case Studies and Practical Implementations

The Luca Suite™, the first implementation of SBRM and a major component of Pacioli.ai provides a user-friendly multi-user collaboration engine that guides each of the actors defined under MiCA regulations through the structured data disclosure process, ensuring all regulatory requirements are met for each actor without needing specialized expertise. It automates the drafting of whitepapers in the iXBRL format per MiCA and also VARA specifications, making the content both human-readable and machine-readable.

SBRM Supplements XBRL

It is crucial for enterprises, regulators and standard setters to recognize that SBRM is a model based multi data structure interchange specification. XBRL is a single data format specification. SBRM does not compete with XBRL, or any of the other formats that work with SBRM.

The adoption of SBRM for iXBRL reporting using Luca SuiteTM presents a powerful opportunity and solution for non-technical users to collaborate and enhance the efficiency, accuracy, and transparency of the financial as well as the non-financial reporting elements of crypto asset disclosure under the MiCA regulation.

By leveraging the capabilities of SBRM, organizations can meet regulatory requirements more effectively, which will enable regulators to improve their oversight and compliance monitoring processes on behalf of investors. This alignment of interests ultimately contributes to a more stable, trustworthy, and well-regulated crypto assets market in the EU.

Learn more about SBRM on the OMG website.

Interested parties should submit a request to Auditchain Labs AG if they want to schedule a demo of the first implementation of SBRM.

About Standard Business Report Model

Standard Business Report Model (SBRM) is a forthcoming specification from Object
Management Group® (OMG®) that builds on XBRL to further increase its usability and
applicability, while retaining full interoperability. SBRM makes it easier for organizations to make use of world class standards and provide a standard approach to safely, reliably, and effectively automate information exchange.

About Object Management Group®

The Object Management Group® (OMG®) is an international, open membership, not-for-profit technology standards consortium with representation from government, industry, and academia. OMG Task Forces develop enterprise integration standards for a wide range of technologies and an even more comprehensive range of industries. OMG's modeling standards enable robust visual design, execution, and maintenance of software, systems, and other processes. Visit www.omg.org for more information.
Object Management Group and OMG are registered trademarks of the Object Management Group. For a listing of all OMG trademarks, visit https://www.omg.org/legal/tm_list.htm. All other trademarks are the property of their respective owners.

About the Author

Jason Meyers is the lead architect at Auditchain Labs AG which is the developer of Luca SuiteTM, the first implementation of the Standard Business Report Model, a forthcoming specification at Object Management Group®

About Auditchain Labs AG

Auditchain Labs AG is a pioneering force in developing web3 and artificial intelligence-based financial reporting, crypto asset disclosure, audit, and analysis protocols. With a commitment to transparency and accuracy, Auditchain Labs AG aims to revolutionize the landscape of financial and crypto asset disclosure.