MERCURITY FINTECH HOLDING INC.

1330 Avenue of the Americas, Fl 33,

New York, NY 10019

March 1, 2024

Securities and Exchange Commission

Division of Corporate Finance

Office of Crypto Assets

100 F Street, NE

Washington, D.C. 20549

Attn: Ms. Bonnie Baynes, Mr. Mark Brunhofer

Form 20-F for the fiscal year ended December 31, 2022

Form 6-K filed December 28, 2023

File No. 001-36896

Dear Ms. Bonnie Baynes, Mr. Mark Brunhofer:

Reference is made to the proposed disclosures set out in Mercurity Fintech Holding Inc.’s (the “Company” or “we”) response letters dated August 14, 2023 and October 20, 2023, each in response to the staff (the “Staff”) of the Securities and Exchange Commission’s (the “Commission”) comment letters dated July 17, 2023 and September 22, 2023, as well as this letter in response to the Commission’s comment letter dated February 1, 2024 (collectively, the “Proposed Disclosures”). The Company would like to respectfully request to incorporate such Proposed Disclosures into its annual report on Form 20-F for the fiscal year ended December 31, 2023, which will be due by April 30, 2024, instead of filing an amendment to incorporate the Proposed Disclosures into its annual report on Form 20-F for the fiscal year ended December 31, 2022. The reasons for this request is as follows:

In addition, please find below our responses to the questions raised by the Staff in its letter of comments dated dated February 1, 2024 (the “Comment Letter”) relating to the annual report on Form 20-F for the year ended December 31, 2022, which was filed with the Commission by the Company on April 25, 2023. The Company’s responses are numbered to correspond to the Staff’s comments. For your convenience, each of the Staff’s comments contained in the Comment Letter has been restated.

Form 20-F for the fiscal year ended December 31, 2022

Item 5. Operating and Financial Review and Prospects

D. Trend Information, page 70

Response: This is well noted.

Item 15. Controls and Procedures, page 101

Response:

We respectfully submit that the many shortcomings of the Company do reflect a material weakness in our internal control over financial reporting. We have made some improvements and hope to make more efforts in the future to address these shortcomings.

Firstly, the occurrence of the Wei Zhu incident reflected many shortcomings in the Company’s asset management, and we have taken some improvements to strengthen our internal control over the asset management, as stated in our response to prior comment 2.

Secondly, there are still many shortcomings in internal control in other aspects of the Company:

We will continuously remediate these shortcomings as the Company’s business develops and has obtained sufficient capital and human resources:

Consolidated Statements of Cash Flows, page F-13

Response:

1）The Company’s holdings and conversion of the crypto assets.

In our financial statements for the year 2022, we adjusted our cash flow generated from selling crypto assets to operating cash flow, mainly taking into account that the Company had completed the development of a crypto asset quantitative trading software in the first half of 2022, which enabled us to enter a new stage of the Company’s crypto asset quantitative trading business development plan. Unfortunately, the occurrence of the Wei Zhu incident caused the Company to lose control over most of its crypto assets, and hence the Company had to suspend the operation of its crypto asset quantitative trading business due to lack of sufficient digital assets. We did not engage in any transactions related to the crypto asset quantitative trading business between 2022 and 2023.

In our response to prior comment 7, it was incorrect for us to treat all cryptocurrency transactions as daily business activities, and it is necessary for us to correct this error here. In fact, only the cash flows generated by our cryptocurrency quantitative trading business are considered daily business activities. However, the occurrence of the Wei Zhu incident resulted in the Company’s failure to carry out cryptocurrency quantitative trading business as planned. We did not strictly distinguish the types of cryptocurrencies we sold, but instead treated all cryptocurrency transactions as daily business activities, which was a flaw in our previous financial accounting.

There are four transactions where the Company sold and used crypto assets to pay service fees between 2021 and 2022, which are as follows:

Except for the small amount of Bitcoin, USD Coins and USDTs sold by the Company before the Wei Zhu incident in exchange for cash and payment of operational funds and expenses required for daily operations, the Company did not trade any crypto assets through quantitative trading business during the period from 2021 to 2023. The average holding period for USD Coins sold or used for payment by the Company aforementioned is 1.3 months, the average holding period for Bitcoin sold or used for payment by the Company aforementioned is one month, and the average holding period for USDTs sold or used for payment by the Company aforementioned is 22 months.

After the Wei Zhu incident, the Company failed to carry out cryptocurrency quantitative trading business as planned, nor did any other cryptocurrency transactions occur. Therefore, it is meaningless to estimate the frequency at which the Company converts its crypto assets into US dollars until we have sufficient controllable crypto assets to resume our crypto asset quantitative trading business.

Please provide the following:

2) The Company’s reconsideration of the classification of cash flows generated from crypto asset transactions.

As mentioned above, we changed our classification of cash flows generated from selling crypto assets in our financial statements for the year 2022 mainly taking into account that the Company had completed the development of a crypto asset quantitative trading software in the first half of 2022, which enabled us to enter a new stage of the Company’s crypto asset quantitative trading business development plan.

We have reconsidered the specific uses of the crypto assets owned by the Company based on our current and future business plans related to crypto assets, and we have classified or will classify the cash flows generated from past and future transactions of these crypto assets according to their specific uses.

In our financial statements as of December 31, 2022, we included all sales of crypto assets as part of the quantitative trading of cryptocurrency assets, and therefore disclosed the corresponding cash flows as operating cash flows. We have realized that this is not a rigorous approach, and therefore we will revise our financial statements to more accurately reflect the categories of relevant cash flows. The specific analysis is as follows:

In the second half of 2021, the Company began to increase its cryptocurrency mining business and the business of quantitatively trading its holdings of cryptocurrency assets as one of its main businesses. During September and October 2021, the Company acquired approximately $5 million of Bitcoin and $5 million of USD Coin through stock issuance. As both Bitcoin and USD Coin meet the definition of intangible assets, the Company recognized all the received Bitcoin and USD Coin as intangible assets. This situation can be considered as the Company engaging in both non-cash financing and non-cash investment activities without generating any cash flows.

The original plan of the Company was to use the received crypto assets as follows:

a) The Company plans to use a portion of the crypto assets as a source of funds for daily operations, including selling these crypto assets in exchange for monetary funds, or directly paying for goods or service fees with these crypto assets. The sale of these crypto assets by the Company in exchange for monetary funds can be considered as the sale of intangible assets invested by the Company, which belongs to cash inflows generated from investment activities; The direct payment of goods or service fees by the Company using these crypto assets can be regarded as the conversion of its invested intangible assets into non-cash operating expenses, without generating any cash flow.

b) The Company plans to use another portion of the received crypto assets as the principal for conducting quantitative trading of crypto assets. The Company will transfer these crypto assets to a dedicated account for conducting quantitative trading of crypto assets. As this business is likely to lead to frequent buying and selling of crypto assets, we believe that these crypto assets used for quantitative trading are more appropriately to be accounted for as current assets measured at fair value. Due to the occurrence of the Wei Zhu incident, all Bitcoin and USD Coin owned by the Company were improperly seized by the Sheyang County Public Security Bureau. As a result, the Company was unable to proceed with the planned quantitative trading of crypto assets. Therefore, in the Company’s financial statements as of December 31, 2022, the crypto assets owned by the Company were not classified and listed according to their intended use. However, once the Company regains control of Bitcoin and USD Coin that were improperly seized by the Sheyang County Public Security Bureau in the future, the Company will begin to advance its planned crypto asset quantitative trading business. With the introduction of ASC 350-60 Goodwill and Other Crypto Assets, the Company has established clear guidelines for measuring its crypto assets at fair value. Hence, in the future, under the guidance of ASC350-60 and ASC230-10-45-20, the cash flows generated by the Company’s holdings of crypto assets specifically used for selling to earn price differences should all be categorized as cash flows generated from operating activities.

However, the Company has not clearly defined the specific quantities of crypto assets for different purposes mentioned above. According to ASC230-10-45-22, the Company should classify the generated cash flows based on each identifiable source or use in cash inflows and outflows. After our reconsideration, we believe that the cash flow obtained by the Company from selling 1 million USD Coins in January 2022 should be classified as cash inflows from investment activities. We will revise and restate the classification of this transaction in the financial statements as of December 31, 2022. We will reclassify the cash flows generated from the sale of crypto assets in 2022 as cash inflows from investment activities.

The restated consolidated statements for cash flows for the year ended December 31, 2022, 2021 and 2020 are as follows:

MERCURITY FINTECH HOLDING INC.

FORMERLY KNOWN AS JMU LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In U.S. dollars, except for number of shares and per share (or ADS) data)

MERCURITY FINTECH HOLDING INC.

FORMERLY KNOWN AS JMU LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In U.S. dollars, except for number of shares and per share (or ADS) data)

3) Improvement measures for the Company’s classification management and accounting of the crypto assets in the future.

We will further refine the classification standards for the crypto assets owned by the Company, improve the asset management system, and standardize relevant accounting.

Note 2. Restatement of Previously Issued Financial Statements

Previous Financial Statements Change from Impairment of Intangible Assets, page F-20

Response:

1） We have revised the replies to the prior comment 15 as follows:

Note of Intangible assets, net (revised) in the 20-F for the year ended December 31, 2022. The following includes the modifications we have made to the note of “Intangible assets, net” based on Comment 7.

INTANGIBLE ASSETS, NET

Intangible assets, net consist of the following:

(A) Crypto assets for general investment

Crypto assets for general investment, net consist of the following:

The movement of the crypto assets for general investment for the year ended December 31, 2021 and 2022 is as follows:

(B) The right to recover the crypto assets (The crypto assets that are outside of the Company’s control).

The right to recover the crypto assets, net consist of the following:

On February16, 2022, the former acting Chief Financial Officer Wei Zhu, who was also the Company’s former Co-Chief Executive Officer, and a former member and Co-Chairperson of the Board, was taken away from the Company’s office in Shenzhen, China for personal reasons to cooperate with the investigation from Sheyang County Public Security Bureau, Yancheng City, Jiangsu Province, People’s Republic of China. At the same time, Sheyang County Public Security Bureau forcibly removed the safe belonging to the Company that stored the digital asset hardware cold wallet, and forcibly destroyed the safe and seized the crypto asset hardware cold wallet and all crypto assets stored in it.

The book value on December 31, 2022 of the Bitcoins and USD Coins stored in the out-of-control wallet was $3,944,809, including 125.8584797 Bitcoins with the book value of $1,952,598 and 2,005,537.50 USD Coins with the book value of $1,992,211, and we verified that Bitcoins and USD Coins with a book value as of December 31, 2022 of $3,469,762 stored in the out-of-control wallet had been transferred to another unknown wallet.

The book value and deposit status of the Bitcoins and USD Coins that are outside of the Company’s control on December 31, 2022 are as follows:

The movement of the right to recover the crypto assets for the year ended December 31, 2021 and 2022 is as follows:

PRC law firm Deheng Law Office (“Deheng”) has been representing the Company in our efforts to recover the wrongfully seized cold wallet and crypto assets from the Public Security Bureau. On November 21, 2022, Deheng submitted the complaint and evidentiary materials to the Public Security Bureau according to the Criminal Procedure Law and the Provisions on Procedures of Handling Criminal Cases by Public Security Organs (the “PRC Criminal Law”). As of December 31, 2022, we and Deheng have not received any definitive response from the Public Security Bureau.

On behalf of the Company, Deheng went to Sheyang Public Security Bureau several times to communicate with the police officer in charge of Wei Zhu’s case, and Deheng learned that Sheyang Public Security Bureau suspected that the crypto assets belonged to the Company was related to Wei Zhu’s case without any evidence and because Wei Zhu’s case was still in the stage of investigation, they insisted on continuing to implement temporary measures to retain the seized assets.

According to the legal opinion issued by Deheng Law Firm, the ownership of the crypto assets seized by Sheyang Public Security Bureau is clear and can be verified as belonging to the Company, and the seizure of the Company’s crypto assets by Sheyang Public Security Bureau is improper. If Sheyang Public Security Bureau does not release the seizure of the Company’s crypto assets, Sheyang Public Security Bureau should issue a written decision in accordance with laws and regulations.

We together with Deheng will continue to vigorously pursue the Recovery Proceeding, attempting to regain its cold wallet and crypto assets contained therein, which we believe were wrongfully seized and impounded by the Public Security Bureau. When the relevant case enters the judicial process, the Company can submit relevant evidence to the court to restore the Company’s ownership and control rights over the digital asset hardware cold wallet and the crypto assets in it, because the evidence that these crypto assets belong to the Company is clear, and we are confident to recover these crypto assets through legal procedures. Considering the special situation of China’s public security and judicial system, the Company has not considered directly filing a lawsuit against Sheyang Public Security Bureau.

From a legal perspective, the Company should be able to recover the Company’s control over these crypto assets through judicial procedures, and hence we have not confirmed the relevant losses of these seized crypto assets. However, if the case is not handled by Sheyang Public Security Bureau or subsequent judicial proceedings in the way we anticipate, the Company may also incur related losses.

(C) The impairment loss of intangible assets

Due to the price crash of Bitcoin in 2022, the Company, out of caution, decided to change the impairment test method of Bitcoin and other crypto assets from testing once or twice a year by calculating the fair value based on the average daily closing price of the past 12 months to testing every day by calculating the fair value based on the intraday low price. We restated the impacted financial statements as of December 31, 2021, and for the year ended December 31, 2021, and related notes included herein to correct these changes. We recognized $1,292,568 impairment loss of crypto assets for the year ended December 31, 2021 as the restated financial statements, and we recognized $817,609 impairment loss of crypto assets and $2,326,444 impairment loss of the right to recover the crypto assets for the year ended December 31, 2022. Please refer to Note 2 for the restatement of the impairment of intangible assets.

The impairment loss of intangible assets for the year ended December 31, 2021 and 2022 is detailed as follows:

Our selected financial data (revised) in Item 3 and 5 of the Form 20-F for the year ended December 31, 2022.

ITEM 3. KEY INFORMATION—A. Selected Financial Data

The following selected consolidated statements of operations data for the year ended December 31, 2020, 2021 and 2022, and selected consolidated balance sheet data as of December 31, 2021 and 2022, have been derived from our audited consolidated financial statements included elsewhere in this annual report. Our consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. Our historical results are not necessarily indicative of results expected for future periods. You should read this selected financial data section together with our consolidated financial statements and the related notes and “Item 5. Operating and Financial Review and Prospects” included elsewhere in this annual report.

Selected Consolidated Financial Data

Note:

Due to the adverse regulatory measures taken by the PRC government in 2021 on digital currency production and transaction, the Company’s Board of Directors decided on December 10, 2021 to divest the PRC companies of the related business controlled through VIE agreements and the divestiture was completed on January 15, 2022. The financial information related to the two divested VIEs subject to divestment have been reclassified in the accompanying audited consolidated financial statements as discontinued operations for the year ended December 31, 2020 and 2021. The consolidated statements of operations and the consolidated statements of cash flows for the year ended December 31, 2020 are adjusted retrospectively to reflect the change.

Due to the price crash of Bitcoin in 2022, the Company, as a matter of caution, decided to change the impairment test method of Bitcoin and other crypto assets from testing once or twice a year by calculating the fair value based on the average daily closing price of the past 12 months to testing every day by calculating the fair value based on the intraday low price. Because the intraday low price of crypto assets to be utilized in calculating impairment of our crypto assets held as that metric is the most accurate indicator of whether it is more likely than not that the asset is impaired. The Company evaluated the materiality of the changes from qualitative and quantitative perspectives, and concluded that the changes were material to the Consolidated Balance Sheet as of December 31, 2021 and Consolidated Statements of Operations, Equity, and Cash Flows for the year ended December 31, 2021. The Company restated the impacted financial statements as of December 31, 2021, and for the year ended December 31, 2021, and related notes included herein to correct these changes. Please refer to Note 2 for the restatement of the impairment of intangible assets for the year ended December 31, 2021.

In the previously issued consolidated statements of operations for the year ended December 31, 2021, the Company did not clearly disclose the Provision for Doubtful Accounts, (Loss)/Income on disposal of intangible assets and Impairment loss of intangible assets, which were generally listed in Impairment Loss. The Company restated these items in the current consolidated statement.

Please refer to Note 2 for the restatement of the intangible assets as of December 31, 2021.

Starting from the second half of 2021, the Company has identified cryptocurrency mining and quantitative trading as one of its main businesses. However, the many uncertainties in the cryptocurrency industry have also brought significant operational risks to the Company. The Company accounted for its crypto assets as intangible assets in the Form 20-F for the year 2021 and 2022. In the Form 20-F for the year 2021, the Company conducted impairment testing on Bitcoin as of December 31, 2021, based on the average daily closing price of Bitcoin for the 12 months prior to December 31, 2021, as the fair price of Bitcoin.

However, the significant decline in Bitcoin market prices in 2022 had raised many uncertainties about our future market value expectations for Bitcoin. If we continue to compare Bitcoin for impairment testing based on the average daily closing price of the past 12 months as the fair price, it may result in the Company’s financial statements as of December 31, 2022 overestimating the value of Bitcoin. We have carefully discussed this issue with our auditor and audit committee, and considering the industry development and regulatory uncertainties faced by the crypto asset industry, we have ultimately decided to adopt a stricter impairment testing method for the Company’s crypto assets. The new impairment testing method requires the Company to conduct daily impairment testing on its crypto assets and use the lowest daily transaction price as the fair price of the corresponding crypto assets. We have recalculated and confirmed the intangible asset impairment losses for 2021 and 2022 using the new crypto asset impairment testing method, and have restated the financial statements as of December 31, 2021.

The Impairment testing method for cryptocurrency assets in the Company’s financial statements for 2022 is a change in accounting estimates based on objective industry environmental factors that have caused significant fluctuations in the crypto asset market during 2022. However, we acknowledge that there are still many shortcomings in our business and asset risk management related to crypto assets, which has led to many difficulties and shortcomings in our related disclosure control procedures (DCP) and internal control over financial reporting (ICFR), and we will further improve these shortcomings.

In addition to the shortcomings in asset management exposed by the Wei Zhu incident, the Company has not developed a detailed investment strategy for crypto assets, including the investment size and category of crypto assets held by the Company, as well as clear holding intentions. The Company also lacks necessary preventive measures for possible fluctuations in crypto asset market prices, which brings significant operational and financial risks to the Company. These shortcomings increase the difficulty of disclosure control procedures and internal control over financial reporting.

Based on the Compan’’s new business architecture, we will further improve the investment strategy for crypto assets, classify crypto assets according to holding intentions, and plan the total investment scale of crypto assets annually and allocate and adjust them quarterly. We will establish detailed accounting standards, disclosure control procedures (DCP) and internal control over financial reporting (ICFR) for crypto assets with different holding intentions and categories, and we will separately manage and account for different categories of crypto assets, and disclose them in detail by category.

Based on our previous analysis and statements on the shortcomings and improvement measures of the Compan’’s internal control, we will revise the content of “ITEM 15. CONTROLS AND PROCEDURES” as follows:

ITEM 15. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that the information required to be disclosed by us in the reports that we file and furnish under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms, and that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

Our management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness of our disclosure and procedures (as defined in Rule 13a 1I) under the Exchange Act) as of the end of the period covered by this report, as required by Rule 13a 15(b) under the Exchange Act. Based upon that evaluation, our management has concluded that, as of December 31, 2022, our disclosure controls and procedures were not effective, due to the material weakness identified by us, which is described below under “Management’s Annual Report on Internal Control over Financial Reporting.”

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions; (2) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with appropriate authorizations; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness of our internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Under the supervision of and with the participation of our management, we assessed the effectiveness of our internal control over financial reporting as of December 31, 2022, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). As part of our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2022, management identified the following material weakness:

A material weaknIss is a defi”ienc’, or a combination of daeficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

This material weakness did not result in any identified material misstatements to the financial statements, but resulted in revision of previously issued financial statements. Based on this material weaknesses, management concluded that at December 31, 2022, internal control over financial reporting was not effective.

Remediation

Our Board of Directors, Audit Committee and management take internal control over financial reporting and the integrity of our financial statements seriously.

Our management is responsible for its assessment of the effectiveness of internal controls over financial reporting and is committed to improving its controls related to the material weaknesses described above, such that these controls are designed, implemented, and operating effectively.

Following the identification of this material weakness described above, our management commenced implementation of a remediation plan. The remediation plan includes the following steps to improve our internal control over financial reporting:

While we intend to fully address the material weakness and significant deficiency in our internal control over financial reporting by the end of 2023, the foregoing remediation measures may not be sufficient and we may need to implement additional measures and enhance their implementation. We are not able to estimate with reasonable certainty the costs that we will need to incur to implement these and other measures designed to improve our internal control over financial reporting. The process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. See “Item 3. Key Information—D. Risk Factors — Risks Related to Our Business and Industry — A material weakness in our internal control over financial reporting has been identified, and if we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results, meet our reporting obligations or prevent fraud.”

Attestation Report of the Registered Public Accounting Firm

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting, because we are neither a “large accelerated filer” nor an “accelerated filer” as such terms are defined in Rule 12b 2 under the Exchange Act.

Changes in Internal Control over Financial Reporting

We have established our U.S. subsidiary Mercurity Fintech Technology Holding Inc. as one of our main business entities. Our business and management have undergone significant changes and are distributed in different regions such as New York, Hong Kong, and Shenzhen. We have designed and implemented new internal control processes and systems based on changes in the Company’s business and personnel.

Except for the material weakness identified as of December 31, 2022, the remedial measures and except for the changes described above, there have been no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the period covered by this annual report on Form 20-F that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Note 3. Summary of Significant Accounting Policies Revenue

Recognition

Cryptocurrency Mining, page F-30

Response:

We will provide enhanced proposed disclosure for “D. Trend Information” in “Item 5. Operating and Financial Review and Prospects” as follows:

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

D. Trend Information

After the Wei Zhu incident, the Company’s board of directors and management underwent significant changes in 2022. From March 2022 to April 2023, the new management made significant adjustments to the Company’s business strategy and development focus.

After the adjustment of the business structure: (i) Our US subsidiary Mercurity Fintech Technology Holding Inc. (“MFH Tech”) functions as our operating entity for distributed computing and storage services and digital consultation services business in North America. (ii) Our US subsidiary Chaince Securities, Inc. (“Chaince Securities”) (as well as its future subsidiary) will function as the operating entity of our future financial advisory services, online and traditional brokerage services business in North America. (iii) Our Hong Kong subsidiary Ucon Capital (HK) Limited (“Ucon”) and its China subsidiary Beijing Lianji Future Technology Co., Ltd. will function as the operating entity of the digital consultation services business in the Asia-Pacific region.

In July 2022, we added digital consultation services as one of our main businesses going forward, providing business consulting services and digital payment solutions to global corporate clients, especially those in the blockchain industry, and continued our planned expansion into online and traditional brokerage services. We incorporated MFH Tech to develop distributed computing and storage services (including cryptocurrency mining and providing cloud storage services for decentralized platform operators) and digital consultation services.

On August 23, 2022, MFH Tech signed a Consulting Agreement with a Chinese media company, pursuant to which MFH Tech will serve as a business consultant in order to facilitate the client to establish the entity in the United States and implement its financing strategy, and the agreed amount of the fixed consideration portion of the agreement is $160,000. We recognized consultation services revenue of $80,000 for the year ended December 31, 2022.

In 2022, the Company’s revenue from the consultation services accounted for 9.3% of the total revenue. We expect the Company to get more clients in the consultation services business in the next two years, thereby generating more revenue, and the proportion of the revenue from consultation services to total revenue will gradually increase.

In the first half of 2022, the Company’s revenue came entirely from the Bitcoin shared mining business, which began in October 2021 and ended in April 2022. During the same period, the Wei Zhu incident caused the Company to temporarily lose control of most of its cryptocurrencies, and the Company’s daily operations also faced temporary difficulties, resulting in the Company’s original expansion plan for cryptocurrency mining business not being implemented. The revenue from Bitcoin shared mining business in 2022 accounted for 90.7% of the total revenue.

On December 15, 2022, we entered into an asset purchase agreement with Huangtong International Co., Ltd., providing for the acquisition and purchase of Web3 decentralized storage infrastructure, including cryptocurrency mining servers, cables, and other electronic devices, for an aggregate consideration of USD$5,980,000, payable in our ordinary shares. The Web3 decentralized storage infrastructure is expected to achieve a maximum storage capacity of approximately 100PiB. We plan to use a portion of the storage capacity (60.4 PiB) for Filecoin mining business and we plan to use the remaining storage capacity from the infrastructure to provide cloud storage services to other decentralized platform operators. For the year ended December 31, 2022, we earned $348 in Filecoin mining revenue from physical mining operations, and did not receive any revenue from providing cloud storage services to decentralized platform operators.

We expect our storage capacity for Filecoin mining operations to reach 60.4PiB before June 2024. After our storage capacity reaches 60.4 PiB, we are expected to receive over 10,000 Filecoins per month. Based on the average lowest price of $5.2 for Filecoins on the Coinbase platform for the 30 days prior to December 31, 2022, our monthly Filecoin mining revenue will reach $52,000, and the annual Filecoin mining revenue will exceed $600,000. In addition, we are expected to generate more revenue in providing cloud storage services to other decentralized platform operators.

On January 10, 2023, we entered into an asset purchase agreement with Jinhe Capital Limited, providing for the purchase of 5,000 Antminer S19 PRO Bitcoin mining machines, for an aggregate consideration of US$9 million. Considering the increasing difficulty of mining in the crypto mining industry and the general losses by top crypto mining enterprises, we have decided to reduce the scale of procurement of Bitcoin miners and reduce the Company’s investment in the crypto mining field. As such, we are negotiating with Jinhe Capital Limited to reduce or even cancel the purchase of all equipment in the asset purchase agreement.

We expect that the revenue from distributed computing and storage services (including Filecoin mining and providing cloud storage services to other decentralized platform operators) will become the main source of revenue in 2023 and 2024, although our consultation business will continue to grow.

On January 28, 2023, we decided to write off NBpay Investment Limited and its subsidiaries, which had no meaningful assets or business nor employees.

Also considering the enormous uncertainty brought by the cryptocurrency market turmoil in the past two years to the blockchain industry, as well as the regulatory uncertainties, although we have the ability to quickly reorganize the blockchain technical service team, we have decided not to continue conducting blockchain technology service business related to the asset trading platform, asset digitalization platform and decentralized finance (DeFi) platform in the next two years.

On April 12, 2023, we completed the incorporation of another U.S. subsidiary, Chaince Securities, for which we plan to develop financial advisory services, online and traditional brokerage services independently in the future. We plan to acquire a broker dealer in U.S. to obtain the relevant resources and financial license to conduct the financial advisory, online and traditional brokerage services business. We expect the financial advisory, online, and traditional brokerage services to become one of the Company’s main businesses by 2024.

Note 9. Intangible Assets, Net, page F-40

Response:

The Statement of Financial Accounting Concepts No.8 - Elements of Financial Statements - Chapter 4, Elements of Financial Statements, stipulates the definition of Asset: an Asset is a present right of an entity to an economic benefit.

The ASC 350-20 provides the definition of Intangible Assets: Intangible Assets means Assets (not including financial assets) that lack physical substance. (The term intangible assets is used to refer to intangible assets other than goodwill.)

Although the crypto assets out of control constitute a legal right of the Company to restore control of the crypto assets, rather than crypto assets themselves, they still meet the definition of assets, because once the Company regains control of the crypto assets, the Company will regain corresponding economic benefits, and the right to recover the crypto assets has no physical form so that it also meets the definition of intangible assets. Therefore, the Company still accounts for these crypto assets out of control (the right to recover the crypto assets) as intangible assets in the Company’s financial statements as of December 31, 2022. However, in order to distinguish between the normally held intangible assets and the right to recover the crypto assets, we have decided to make the following modifications and supplements in the notes to the financial statements as of December 31, 2022, to: a) clarify that the crypto assets out of control is actually a right to restore control of the crypto assets rather than the crypto assets themselves; and b) list the right to restore control of the crypto assets separately to distinguish them from other crypto assets. We have revised note of Intangible assets, net (revised) in the 20-F for the year ended December 31, 2022. Please refer to our responses to Comment 4 above.

As per ASC450-20-25-2, an estimated loss from a loss contingency shall be accrued by a charge to income if both of the following conditions are met:

a) Information available before the financial statements are issued or are available to be issued (as discussed in Section 855-10-25) indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements. Date of the financial statements means the end of the most recent accounting period for which financial statements are being presented. It is implicit in this condition that it must be probable that one or more future events will occur confirming the fact of the loss.

b) The amount of loss can be reasonably estimated.

The purpose of those conditions is to require accrual of losses when they are reasonably estimable and relate to the current or a prior period. Paragraphs 450-20-55-1 through 55-17 and Examples 1-2 (see paragraphs 450-20-55-18 through 55-35) illustrate the application of the conditions. As discussed in paragraph 450-20-50-5, disclosure is preferable to accrual when a reasonable estimate of loss cannot be made. Further, even losses that are reasonably estimable shall not be accrued if it is not probable that an asset has been impaired or a liability has been incurred at the date of an entity’s financial statements because those losses relate to a future period rather than the current or a prior period. Attribution of a loss to events or activities of the current or prior periods is an element of asset impairment or liability incurrence. According to the legal opinion issued by Deheng Law Firm (“Deheng”), the seizure procedure implemented by the Sheyang County Public Security Bureau on these crypto assets is inappropriate. Due to the impact of China’s COVID-19 prevention and control policies in 2022, we encountered many difficulties in attempting to recover these crypto assets. We instructed Deheng to communicate with the Sheyang Public Security Bureau, the Sheyang Procuratorate and the court multiple times in 2023. At present, we are requesting the superior departments and supervision departments of the Sheyang Public Security Bureau to correct the improper seizure of the Company’s assets by the Sheyang Public Security Bureau through administrative appeals. Although the Company has not yet recovered control of these crypto assets, the Company and Deheng are confident in recovering these assets, because the evidence which show that these crypto assets belong to the Company is very clear. Hence, we do not believe that the Company will be unable to recover control of these crypto assets, and we do not believe that there will be related losses in the future. According to ASC450-20-25-2, we have not recognized any contingent losses related to these crypto assets that may not be recoverable in our financial statements as of December 31, 2022.

Therefore, the Gains and Losses from the Recognition of Non Financial Assets Topic (ASC 610-20) is not applicable to the accounting of the Company’s out of control crypto assets.

As 860-10-05-1, the Transfers and Servicing Topic (ASC 860) establishes accounting and reporting standards for transfers and servicing of financial assets. It also establishes the accounting for transfers of servicing rights. It is obvious that our right to restore the crypto assets (the Company’s crypto assets out of control) is not a servicing right and does not fall within the scope of ASC860’s application.

Response:

1) The Bitcoins and USD Coins out of control are actually the rights to recover the Bitcoins and USD Coins.

The Bitcoin and USD Coin (crypto assets improperly seized by the Sheyang County Public Security Bureau in China) owned by the Company on December 31, 2022 are actually a right to recover the crypto assets, as the Company has lost control over these crypto assets. The assets that the Company has appealed to the Sheyang County Public Security Bureau for restoration is equal in amount to the crypto assets in the hardware cold wallet that were improperly seized by the Sheyang County Public Security Bureau, rather than a fiat currency amount. In the financial statements of the Company as of December 31, 2022, we still accounted for these uncontrolled crypto assets as intangible assets and used the accounting method for intangible assets, which is to use the net amount of cost minus impairment as the book value in accordance with the relevant standards in ASC350.

2) The basis for the Company to still recognize uncontrolled crypto assets as intangible assets.

As FASB Statement of Financial Accounting Concepts No. 6 Elements of Financial Statements, assets are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. As ASC350-20, Intangible Assets means Assets (not including financial assets) that lack physical substance. (The term intangible assets is used to refer to intangible assets other than goodwill.)

Although the crypto assets out of control have become a legal right of the company to restore the crypto assets rather than the crypto assets themselves, they still meet the definition of assets, because once the company restores the crypto assets, the company will regain corresponding economic benefits, and the right to recover the crypto assets has no physical form so that it also meets the definition of intangible assets. Therefore, the company still accounts for these crypto assets out of control (the right to recover the crypto assets) as intangible assets in the company’s financial statements as of December 31, 2022. However, in order to distinguish between the normally held intangible assets and the right to recover the crypto assets, we have decided to make the following modifications and supplements in the notes to the financial statements as of December 31, 2022: a) clarify that the crypto assets out of control is actually a right to restore the crypto assets rather than the crypto assets themselves; b) list the right to recover the crypto assets separately to distinguish them from other crypto assets.

We have revised note of Intangible assets, net (revised) in the 20-F for the year ended December 31, 2022. Please refer to the responses to Comment 4.

3) Our considerations for the applicability of ASC 450 Contingencies.

As ASC450-20-25-2, an estimated loss from a loss contingency shall be accrued by a charge to income if both of the following conditions are met:

a) Information available before the financial statements are issued or are available to be issued (as discussed in Section 855-10-25) indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements. Date of the financial statements means the end of the most recent accounting period for which financial statements are being presented. It is implicit in this condition that it must be probable that one or more future events will occur confirming the fact of the loss.

b) The amount of loss can be reasonably estimated.

The purpose of those conditions is to require accrual of losses when they are reasonably estimable and relate to the current or a prior period. Paragraphs 450-20-55-1 through 55-17 and Examples 1-2 (see paragraphs 450-20-55-18 through 55-35) illustrate the application of the conditions. As discussed in paragraph 450-20-50-5, disclosure is preferable to accrual when a reasonable estimate of loss cannot be made. Further, even losses that are reasonably estimable shall not be accrued if it is not probable that an asset has been impaired or a liability has been incurred at the date of an entity’s financial statements because those losses relate to a future period rather than the current or a prior period. Attribution of a loss to events or activities of the current or prior periods is an element of asset impairment or liability incurrence.

According to the legal opinion issued by Deheng, the seizure procedure implemented by the Sheyang County Public Security Bureau on these crypto assets is inappropriate. Due to the impact of China’s COVID-19 prevention and control policies in 2022, we encountered many difficulties in attempting to recover these crypto assets. We instructed Deheng to communicate with the Sheyang Public Security Bureau, the Sheyang Procuratorate and the court multiple times in 2023. At present, we are asking the superior departments and supervision departments of the Sheyang Public Security Bureau to correct the improper seizure of the Company’s assets by the Sheyang Public Security Bureau through administrative appeals. Although the Company has not yet recovered control of these crypto assets, the Company and Deheng are confident in recovering these assets, because the evidence that these crypto assets belong to the Company is clear. Hence, we do not believe that the Company is likely to be unable to recover control of these crypto assets, and we do not believe that there will be related losses in the future. According to ASC450-20-25-2, we have not recognized any contingent losses related to these crypto assets that may not be recoverable in our financial statements as of December 31, 2022.

4) Regarding the form of the Company’s crypto assets out of control and our assertion of recovery.

We need to clarify that the seizure of the Company’s safe and its contents as well as the transfer of cryptocurrency to a wallet not controlled by the Company are the causes and ways in which the Company’s cryptocurrency assets were rendered out of control, and we have also disclosed this fact in detail in the note of intangible assets, net in the 20-F for the year ended December 31, 2022.

On February16, 2022, the former acting Chief Financial Officer Wei Zhu, who was also the Company’s former Co-Chief Executive Officer, and a former member and Co-Chairperson of the Board, was taken away from the Company’s office in Shenzhen, China for personal reasons to cooperate with the investigation from Sheyang County Public Security Bureau, Yancheng City, Jiangsu Province, People’s Republic of China. At the same time, Sheyang County Public Security Bureau forcibly removed the safe belonging to the Company that stored the digital asset hardware cold wallet, and forcibly destroyed the safe and seized the crypto asset hardware cold wallet and all crypto assets stored in it. The book value on December 31, 2022 of the Bitcoins and USD Coins stored in the out-of-control wallet was $3,944,809, including 125.8584797 Bitcoins with the book value of $1,952,598 and 2,005,537.50 USD Coins with the book value of $1,992,211, and we verified that Bitcoins and USD Coins with a book value as of December 31, 2022 of $3,469,762 stored in the out-of-control wallet had been transferred to another unknown wallet.

The incident that caused the Company to lose the crypto assets was an emergency difficult to predict. After the incident, the Company has been advocating for the restoration of control over these crypto assets, which was improperly seized by the Sheyang County Public Security Bureau. We instructed Deheng to communicate with Sheyang County Public Security Bureau multiple times. Sheyang County Public Security Bureau has continuously claimed that these crypto assets are only being temporarily seized, as they suspect that these crypto assets are related to a major suspect they are investigating. According to Deheng’s legal opinion, the Sheyang County Public Security Bureau should not have assumed that these crypto assets are related to other individuals without any evidence, and their seizure procedures on these crypto assets are incorrect. Therefore, although the Sheyang County Public Security Bureau seized the hardware cold wallet which stored these crypto assets and transferred most of them to an unknown wallet controlled by them, the Company still believes that the Sheyang County Public Security Bureau should return the same amount of crypto assets, including 125.8584797 Bitcoins and 2,005,537.50 USD Coins.

5) Accounting measurement for the crypto assets out of control.

We have classified the crypto assets that we have lost control of as the right to recover the crypto assets and disclosed them separately as part of intangible assets. We have revised the note of “Intangible assets, net” in the 20-F for the year ended December 31, 2022. Please refer to the responses to Comment 4 above. We still measure the right to recover the crypto assets based on the net amount of initial cost minus the impairment loss, which is in accordance with ASC Subtopic 350-30, Intangibles-Goodwill and Other: General Intangibles Other than Goodwill (“ASC 350-30”).

We estimated the fair values of the crypto assets out of control based on the lowest transaction price on the Coinbase platform every day, and we recognized $3,111,232 impairment loss of the right to recover the crypto assets, including $784,788 impairment loss of Bitcoins recognized for the period from January 1 to February 16 in 2022, when the Bitcoins were still under the Company’s control, and $2,326,444 impairment loss of the right to restore the Bitcoins for the period from February 17 to December 31 in 2022, when the Bitcoins were seized from the Company’s control.

Response:

All the USD Coins owned by the company are stored in the hardware cold wallet, and the Company does not have a Circle Mint account.

We would like to clarify that we do not believe that accounting for USD Coin as a financial asset is appropriate. We are only considering the feasibility of reclassifying the Company’s crypto assets such as Bitcoin and USD Coin based on their future use and management methods, and we are only emphasizing the objective characteristics of the crypto assets, which are easy to sell and have relatively consistent market prices. Therefore, we believe that these crypto assets may be more suitable for accounting as current assets measured at fair value. However, when we were replying to the prior comment 14, the ASC 350-60 Intangibles Goodwill and Other Crypto Assets standard had not yet been introduced, and we had not found an accounting standard that perfectly matches the characteristics of these crypto assets to account for them. In the financial statements of the Company as of December 31, 2021 and 2022, we referred to the common practice of other companies, treating the crypto assets as intangible assets and accounting for them at the net amount of initial cost minus impairment, as these crypto assets fully meet the definition of intangible assets, and we believe that such accounting is appropriate.

Currently, we have decided to adopt the accounting standards of ASC 350-60 starting from January 1, 2024, to account for the Company’s crypto assets as intangible assets measured at fair value. ASC 350-60 provides us with a very clear reference for measuring the value of cryptocurrency assets owned by the Company.

We do not believe that we should adopt accounting methods for USD Coin different from Bitcoin, such as separately accounting for USD Coin as a financial asset or other current asset (provided that the specific situation of the USD Coin complies with the accounting standards for financial assets or other current assets). We may consider whether to classify these crypto assets (including the Bitcoins and the USD Coins) separately as other asset types in the future based on their future use and management methods. However, based on the current situation, we believe that it is appropriate for us to classify them as intangible assets.

As per Rule 5-02.15 of Regulation S-X, for intangible assets, we should state separately each class of such assets which is in excess of five percent of the total assets, along with the basis of determining the respective amounts, and any significant addition or deletion shall be explained in a note. We will disclose these details under the intangible asset items in the financial statements and notes in the future Form 20-F.

Note 11. Income Taxes, page F-43

Response:

We will revise the corresponding content in the Note 16 of our June 30, 2023 financial statements provided in Exhibit 99.1 to our Form 6-K filed on December 31, 2022. The revised content is as follows:

Deferred tax assets

The significant components of the Company’s deferred tax assets were as follows:

In the unaudited financial statements as of June 30, 2023, the Company’s deferred tax assets amounted to $251,777, of which $160,438 came from temporary differences caused by the impairment of intangible assets from our Hong Kong subsidiary in previous years. In the financial statements as of December 31, 2022, the Company’s deferred tax assets amounted to $251,005, of which $160,438 came from temporary differences in impairment of intangible asset from our Hong Kong subsidiary for the year and prior years.

Form 6-K filed December 28, 2023

Exhibit 99.1

Managements’ Discussion and Analysis of Financial Condition and Results of Operations Results of Operations

About Non-GAAP Financial Measures, page 10

Response:

It was an error that we characterized the largest non-GAAP adjustment as related to the impairment of property and equipment when it appears from your financial statements that the amounts involved relate to the impairment of your intangible digital assets. We will correct it in the revised Form 6-K for our financial report of the six months ended June 30, 2023.

It was an error that we label our Adjusted Net Loss non-GAAP measure as such when your starting point is operating loss from continuing operations and excludes items of other income and expense as well as the impact of income taxes. We will correct it in the revised Form 6-K for our financial report of the six months ended June 30, 2023.

We have reconsidered the accounting related to crypto assets based on the current business architecture and future business plans of the Company, and referred to the relevant content of Rule 100 (b) of Regulation G and Question 100.01 to restate the calculation and disclosure of our non-GAAP operating loss and net loss. Although the Company is expanding new businesses and has decided not to increase the scale of its cryptocurrency mining business, as of December 31, 2023, the Company’s cryptocurrency mining business remains the main source of revenue, and changes in the market price of the crypto assets held by the Company have a significant impact on the Company’s profits. After careful consideration, we believe that we should not deduct the impairment losses of crypto assets when calculating the operating profit and net profit of non-GAAP. We will correct it in the revised Form 6-K for our financial report of the six months ended June 30, 2023.

The revised related content in the Form 6-K for our financial report of the six months ended June 30, 2023 is as follows:

About Non-GAAP Financial Measures

As a supplement to net loss, we use the non-GAAP financial measure of adjusted net loss which is U.S. GAAP net loss as adjusted to exclude the impact of share-based compensation expenses and changes in fair value of financial instruments. We believe all adjustments are not reflective of our general business performance. This non-GAAP financial measure is provided as additional information to help our investors compare business trends among different reporting periods on a consistent basis and to enhance investors’ overall understanding of our current financial performance and prospects for the future. This non-GAAP financial measure should not be considered in addition to or as a substitute for or superior to U.S. GAAP net loss. In addition, our definition of adjusted net loss may be different from the definition of such term used by other companies, and therefore comparability may be limited.

Reconciliations of non-GAAP financial measures to U.S. GAAP financial measures are set forth in the following table：

Unaudited Interim Consolidated Statements of Changes in Shareholders’ Equity, page F-7

Response:

The revised equity statement as of June 30, 2023 and for the comparable period in 2022 is as follow:

MERCURITY FINTECH HOLDING INC.

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In U.S. dollars, except for number of shares and per share (or ADS) data)

MERCURITY FINTECH HOLDING INC.

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (CONTINUED)

(In U.S. dollars, except for number of shares and per share (or ADS) data)

Should you have any questions regarding the foregoing, please do not hesitate to contact the Company’s counsel, Huan Lou, Esq. of Sichenzia Ross Ference Carmel LLP at (646) 810-2187 or hlou@srfc.law.