Consensus: Invest 2018 was held in New York City on Tuesday and Blox CEO Alon Muroch said that blockchain and cryptocurrencies put “the finance side of the world at the forefront of tech,” something that rarely happens.
As cryptocurrency and blockchain adoption grows, some people have called bitcoin “funny money” in the past, but “no one is laughing now,” according to Muroch.
At an event on the accounting and tax implications of blockchain, Hee Lee of EY Financial Accounting Advisory Practice, Jeremy Drane of Libra Tech, and moderator Ron Quaranta of the Wall Street Blockchain Alliance were all on hand for a roundtable discussion.
Accounting and auditing will be impacted by the use of blockchain
According to the panelists, concerns that blockchain will eliminate accounting and auditing are unfounded.
Drane remarked, “Someone’s got to check the checker.” When looking at exceptions and providing an explanation for why they occurred, the auditor will play a critical role.
“Blockchain is no different from other automation tools that capture routine transactions,” says Hee Lee of EY’s Financial Accounting Advisory Practice. According to Lee, changes in the auditing process will occur, but auditors will remain crucial in the areas of judgment.
Lee said there is a lot of interest in how blockchain can improve intercompany transactions.
It’s all about having a single source of truth, which is what blockchain technology can accomplish, Lee said. If that’s the case, he said, financial institutions and other large, complex organisations will save a lot of money by not having to perform reconciliation tasks.
According to Drane, because of the real-time auditing capabilities of blockchain, employees can be put to better use elsewhere.
This is true for both internal and external auditors, according to him, and he predicted that auditing practises will evolve over time.
What changes must be made to the regulatory framework?
It’s time for “nonbelievers” and regulators who have ignored blockchain technology to “start believing in this,” according to Lee. The Financial Accounting Standards Board and the International Accounting Standards Board are included in his list, he added.
If you want “mass adoption of the [crypto] asset class, generally speaking,” you have to be able “to allow the human on the other side of the transaction to easily pay their taxes.”
As Drane pointed out, cryptocurrency platforms may view the transfer of a digital asset as disposal, which is subject to taxes even though consumers may believe otherwise.
According to Muroch, even if recipients didn’t want the airdropped tokens, they could be subject to taxation. According to him, it would be difficult to “convince the IRS [that] you [got] something and don’t want it.”
How data should be handled in the back and middle offices
According to Drane, organisations need to focus on the basics of sourcing their data and processing it appropriately in the back- and middle-office, but each step in this process has significant complexity to it. It is Libra’s “thesis” that building crypto-native solutions rather than retrofitting existing systems is the best way to deal with this complexity.