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Business needs CPA’s who understand blockchain, but what does that mean?
Blockchain, cryptoassets, and numerous other technologies have been all the buzz since bitcoin burst into the mainstream financial conversation in 2017. Among the excitement and debate, however, questions and open items remain among a number of different economic segments. While accountants and CPA’s might not be the first set of professionals that are thought of when the topics of blockchain and cryptoassets are mentioned, they have an important role to play.
Taxation, financial reporting and disclosure, and helping to instill confidence, via audits, in valuations of cryptoassets, are at least partially dependent on accountants being able to handle the workload associated with blockchain. Simultaneously there has been debate about what blockchain, and what blockchain as it connects to other emerging technologies, means for the future of accounting. Will auditors be made irrelevant? Can CPA’s and accountants keep up? What does this mean for financial reporting, and other areas like environmental, social, and governance (ESG) reporting?
From both sides of the conversation, the side of CPA firms as well as the business people they advise, understanding just what CPA’s and accounting professionals should know is critically important. Level-setting expectations is always a good thing, so what do CPA’s actually need to know about blockchain?
In other words, if a firm is representing itself as offering blockchain advisory services to you, what might that look like?
First, CPA’s are not going to have to become computer programming experts overnight. Blockchain can be used for accounting, and in conjunction with accounting tools, but is not necessarily an accounting system. Ask any CPA, and it is unlikely there is much of an appetite to enroll in coding and programming courses. Now, that does not mean practitioners and firms can claim total ignorance; training and education around how blockchain functions is going to be a “must -have” for the foreseeable future. Specifically, sector specific education and training is necessary in order to provide useful advice to clients; riches are in the niches after all. In order to even ask intelligent questions, practitioners need to understand what blockchain is and how it functions.
Second, CPA’s must be able to understand and explain how blockchain (permissionless, permissioned, or some other variant), interoperate with existing technology systems. Blockchains are impressive tools to be sure, but in order to report effectively and efficiently, the information must be able to be exported and analyzed with other existing technology tools. Many of the hacks and breaches that have caused millions in losses to retail and institutional investors alike have been linked to portals and access points rather than underlying blockchains. CPA’s must be able to assess and advise clients on potential weaknesses in the technology and control systems that connect with underlying blockchains.
Most importantly, CPA’s must be able to objectively analyze whether or not blockchain is even a good fit for a client’s business and employees. Like any new technology there were early adopters, but the bulk of clients and customers were not in that category. For some reporting and data management issues the tools that already exist are perfectly serviceable, and in some cases are cheaper, faster, and better than blockchain equivalents. This may very well change over time, but a key role that CPA’s are going to need to fill is that of advisor.
Such a role might take the form of technology expert or cybersecurity consultant, but in any case it should be connected to the objectives of the business. CPA’s don’t need to know everything about blockchain, but they need to be able to understand the technology itself, be able to discuss this technology with clients, and help clients make better choices related to this technology.
Before hiring a CPA or firm to provide those services, make sure they can do so effectively.