Cryptocurrencies, NFT and the Accounting Profession
BEFORE I start discussing cryptocurrencies and non-fungible tokens (NFTs), let me first give you a brief explanation of what they are. Simply put, cryptocurrencies are an alternative form of payment, and they act as a means of having an encrypted, decentralized, and digital ledger, which keeps track of every transaction made in such a blockchain system.
NFTs, on the other hand, are “irreplaceable” or classified as “unique” goods. While fiat currency and cryptocurrency can be classified as fungible tokens since exchanging one bitcoin or dollar for another is basically the same thing, exchanging NFTs means you cannot exchanging one work of art for another because they are two different things.
They say cryptocurrency will change the way the world works. Some say it will replace physical cash. Others see the potential for artists to showcase and earn well from their work. Many experts say that cryptography lays the foundation for the “new Internet”. But in the end, no one really knows what the future holds. As accountants, we can prepare by doing the following:
Familiarize yourself with the blockchain. Blockchain is definitely here to stay. This is very evident in Bitcoin. Unlike foreign currency exchanges where the value is influenced by many factors and parties such as traders, governments, and global politics, Bitcoin and altcoins are primarily valued based on the perception of those who trade them. There can also be many factors. But definitely, cryptocurrency is very different from forex, and the possibilities are endless. For the accounting profession, there may come a time when cryptocurrency will be part of the normal course of trade. We need to understand where to position ourselves by improving our skills and learning more about blockchain technology and economics.
Stay up to date with new and current technology trends. These days, many startups are dipping their toes into the cryptoverse through initial coin offerings (ICOs). Much like how companies raise funds through initial public offerings, ICOs are conducted by crypto projects/teams to raise funds and gather investments for their start-up. As accountants, staying up to date with the latest technology trends and emerging companies will give us a head start and allow us to spot opportunities early on.
Invest in cryptocurrency. They say that experience is the best teacher. My suggestion is that, right now, invest in cryptocurrency. By this I mean get your own trading account, invest in Bitcoin or other altcoins, and see the value of your investment fluctuate. Awareness and updating become automatic as you are heavily invested in how your investment moves from top to bottom. Creating a trading account at one of the major crypto exchanges is easy and free. Cashing out is as simple as making a bank transfer.
Invest in technology and training. Investing in technology and training is a must for businesses and companies aiming to dominate in the next decade. More and more companies will soon offer payments via cryptocurrency and more services will be made available online. For the accounting profession, this represents a new challenge. It is customary to gather audit evidence through trusted third-party sources, but once these crypto exchanges and transactions take place, their decentralization means that accounting and auditing standards will have to adapt and training will have to accompany these changes.
To date, there are still no definitive guidelines issued by the Bureau of Internal Revenue regarding cryptocurrencies and NFTs. The same goes for the Securities and Exchange Commission and other regulatory bodies. The difficulty in regulating cryptocurrency is that it uses a blockchain system where transactions are decentralized (meaning no specific regulator or company regulates it), much like how the internet works. Paradoxically, without much regulation, the integrity of transactions and the ledger that keeps track of all those transactions are also accurate and complete thanks to these blockchain systems.
Some actually fear that the blockchain economy will reduce the demand for accountants and auditors since transactions are all available for download at any time, with integrity preserved. However, in my view, cryptocurrencies will usher in a new world for accountants: a new area of accounting practice where our focus is shifted from verifying transactions to presenting financial information fairly to enable judgments. more informed by stakeholders. depending on the financial situation and performance of the companies.
Carl Angelo Cabusas is the Chief Audit and Digital Transformation Officer of Paguio, Dumayas and Associates, CPAs (PDAC) – PrimeGlobal Philippines and a Fellow of Acpapp. The views and opinions contained in the article are his own and do not represent those of the PDAC and Acpapp.