Market maker arrangements create financial obligations that should be clearly documented, tracked, and reported. The financial treatment differs materially between the two engagement types.
Retainer + Working Capital:
The project deposits both tokens and stablecoins with the market maker and pays a recurring retainer fee. The financial treatment is relatively straightforward but requires discipline:
The retainer is an ongoing operational expense, recorded on a monthly basis. The deposited working capital (tokens and stablecoins) should be recorded as a debit at the time of transfer. Do not treat the deposit as a forward credit or book it as a receivable due back. A credit is recorded only when the capital is actually withdrawn from the service provider and returned to the project. Any profit-sharing arrangements should be recognized as variable credits, but should not be booked at the time of the initial deposit since the amounts and timing are not known. Profit share is credited only when received. At the end of the engagement, any difference between deposited and returned amounts should be reconciled and reported.
Loan + Call Option:
The project lends tokens to the market maker and issues call options on those tokens. This is financially more complex:
The loaned tokens should be recorded as a debit at the time of transfer. Do not book the loan as a forward cash credit or as tokens receivable, since the return asset is not guaranteed. The call options create an additional layer of uncertainty: the market maker may return the tokens at the end of the engagement, or exercise the options and repay in stablecoins at the strike price instead. Because the form of return (tokens or stablecoins) and the timing are not known at the outset, no credit should be booked until the market maker actually returns tokens or exercises options and remits stablecoins. If options are exercised, the project effectively sells tokens at the strike price, and the stablecoin receipt is credited at that point. This makes forward planning less predictable than retainer structures, since both the amount and the form of the return are variable.
Key principle for both models: Projects should maintain clear records of all tokens and capital transferred to market makers, and reconcile regularly against reported activity. The financial treatment of these arrangements varies by jurisdiction, entity structure, and applicable accounting standards. Projects should consult qualified financial and legal advisors to ensure proper classification and reporting.
Book a Consultation with Forgd to discuss financial treatment, inventory tracking, and reporting best practices for your specific arrangement.