Cryptocurrency is an exciting and revolutionary new concept that has already shaken up a whole load of industries, from finance itself, to tech and eCommerce.
After Bitcoin exploded onto the scene a few years ago and, subsequently, shriveled away, it’s safe to say that the embrace and understanding of Bitcoin have been somewhat bumpy and somewhat uncertain.
The ripple effect of cryptocurrencies has knocked plenty of people and industries off balance. One that you may not be surprised to know has been forced to do some self-evaluation in the wake of crypto is accounting.
But the question is, does accountancy, with its traditional ideas of money management, stand to lose out with cryptocurrencies? Let’s take a look at the situation.
Accountants are already, hopefully, pretty good when it comes to tax.
“Bitcoin and its ilk have introduced a somewhat simplified but nevertheless attention-deserving meta, when it comes to taxation. Like normal tax it’s all about how much your making, but at point of sale, crypto-purchase expects nothing from you”, advises Harry Stern, tech blogger at Writinity and ResearchPapersUK.
You still have to be vigilant as an accountant naturally, but there is less detail to deal with since it is a relatively new field. For those hoping to capitalize off Bitcoin the main questions relate to capital gains tax, which will depend on the value increase of your Bitcoin assets by point of sale.
Financial prudence is something that all good accountants will espouse to their customers and potential customers. Money changes constantly, but in its physical form it has existed a long time and even in a banked form there’s still a lot of precedent to go off as a money owner in terms of how to behave. Cryptocurrencies, however, are different.
“It’s obvious to point out”, writes Jarred Alpin, tech writer at DraftBeyond and LastMinuteWriting, “but crypto simply doesn’t have the years of data and research accountants have when dealing with traditional asset management. All this means, is that extreme caution must be taken by accountants and their clients.”
A good accountant will impress on their client that, no matter how much they feel they understand cryptocurrencies, there is much to be learned and many mistakes will be made along that path, hopefully not by your client.
The massively reduced rates of regulation on cryptos make them all a breeding ground for criminal activity and use. It’s a relatively commonly known fact nowadays that all of the data ransom outfits, black hat hackers, cyber terrorists, and others alike, request payment, when necessary, in cryptocurrency.
The upshot of this for accountants is that there is an increased responsibility on you and your firm to screen your clients thoroughly, getting a full idea of who they are both digitally and in a day-to-day sense.
Not only will this help you establish if they are potentially using this new form of currency for illegal activities, but it also will help you work towards aiding with reducing the likelihood that they are targeted successfully when making any of the highly unregulated transactions which dealings with cryptocurrency usually involves.
This is especially elevated if you do accountancy out of office, where you never come face to face with your client. Hackers are particularly adept at identity theft, so make a guarantee that you know who you work for.
Hopefully, these points will help you in your understanding of cryptocurrency’s impact on the world of accounting and if you are a client or an accountant yourself you will hopefully avoid any of the pitfalls which have been created by cryptocurrency’s rise to glory and its continued development as an exciting, if risky, financial tool.