Cryptocurrencies, NFTs and the accounting profession
BEFORE we start discussing cryptocurrencies and non-fungible tokes (NFTs), let me first give you a brief explanation of what these are. In simple terms, cryptocurrencies are an alternative form of payment, and they act as a means to have an encrypted, decentralized and digital ledger, which keeps track of every transaction happening within such a blockchain system.
NFTs, meanwhile, are goods that are "irreplaceable" or are categorized as "unique." While fiat currency and cryptocurrency can be classified as fungible tokens since trading one Bitcoin or dollar for another is basically the same thing, trading NFTs mean you cannot trade one artwork for another since they are two different things.
They say that cryptocurrency will change how the world works. Some say that it will replace physical money. Others see the potential for artists to showcase and earn well from their works. A lot of the experts say that crypto is laying down the foundation for the "new internet." But in the end, nobody really knows what the future stores. As accountants, we can prepare by doing the following:
Get knowledgeable about blockchain. Blockchain is definitely here to stay. This is very evident in Bitcoin. Unlike foreign currency exchanges where value is influenced by a lot of factors and parties such as traders, governments and global politics, Bitcoin and altcoins are mostly valued based on the perception of those who trade them. There may be lots of factors as well. But definitely, cryptocurrency is way different from forex, and the possibilities are endless. For the accounting profession, there might come a time when cryptocurrency will be part of the normal terms of the trade. We should understand where to position ourselves through upskilling and learning more about blockchain technology and economy.
Stay updated with new and current tech trends. A lot of startups nowadays delve into the cryptoverse through initial coin offerings (ICOs). Much like how companies raise funds through initial public offerings, ICOs are being conducted by crypto projects/teams to raise funds and gather investments for their startup. As accountants, staying updated with the latest trends in technology and the companies that are emerging will put us ahead of the game and spot opportunities early on.
Invest in cryptocurrency. They say that experience is the best teacher. My suggestion is that, as early as now, invest in cryptocurrency. By this, I mean to get your own trading account, invest in Bitcoin or other altcoins, and see the value of your investment fluctuate. Awareness and staying updated becomes automatic because you are heavily invested by how your investment is moving up and down. Creating a trading account in one of the big crypto exchanges is easy and free. Cashing in is as easy as doing a bank transfer.
Invest in technology and training. Investing in technology and training is a must for companies and firms aiming to dominate in the next decade. More companies will soon offer payments through cryptocurrency and more services will be made available online. For the accountancy profession, this poses a new challenge. It is usual to gather audit evidence through reliable third-party sources but once these exchanges and crypto transactions take place, their being decentralized means accounting and audit standards will have to adapt and training will need to accompany these changes.
To date, there are still no definitive guidelines issued by the Bureau of Internal Revenue regarding cryptocurrencies and NFTs. This is the same for the Securities and Exchange Commission and other regulatory agencies. The difficulty in regulating cryptocurrency lies in the fact that it uses a blockchain system where transactions are decentralized (meaning no specific regulator or company is regulating it), much like how the internet works. Paradoxically, without much regulation, the integrity of the transactions and the ledger keeping track of all these transactions is accurate and complete due to such blockchain systems as well.
Some actually fear that the blockchain economy will lessen demand for accountants and auditors since transactions are all available to download at any time, with integrity kept intact. However, to my mind, cryptocurrencies will pave the way for a new world for accountants: a new field of accounting practice where our focus is shifted from verifying transactions to fair presentation of financial information in order to allow more informed judgments on the part of stakeholders based on the financial position and performance of companies.
Carl Angelo Cabusas is the audit and digital transformation director of Paguio, Dumayas and Associates, CPAs (PDAC) – PrimeGlobal Philippines and a member of the Acpapp. The views and opinions in the article are his and do not represent that of PDAC and the Acpapp.