Blockchain and cryptocurrency put "the financial side of the world at the forefront of technology, which is not something that often happens," said Bloon CEO Alon Muroch, at the Consensus: Invest 2018, held Tuesday in New York.
A few years ago, some people called bitcoins "funny money", but "no one is laughing now" while the adoption of cryptocurrencies and blockchain is growing, Muroch said.
He joined a group on accounting and tax implications of the blockchain together with Hee Lee, a leading practice at EY Financial Accounting Advisory Practice; Jeremy Drane, Libra Tech chief commercial officer; and moderator Ron Quaranta, president and CEO of the Wall Street Blockchain Alliance.
How the blockchain will affect accounting and auditing
Fears that the blockchain leads to the elimination of accounting and auditing are groundless, the participants said.
"Someone has to check the checker," said Jeremy Drane, Libra Tech's chief commercial officer. The auditor will play a key role in looking at the exceptions and offering a perspective on why such exceptions have occurred, Drane said.
Hee Lee, a leader in the practice of EY Financial Accounting Advisory Practice, says that blockchain is no different than other automation tools that capture routine transactions. The changes occur in the way the audit is conducted, but the auditors will remain viable in the areas of judgment, Lee said.
Lee said that a great deal of interest is developing on how the blockchain can benefit intercompany transactions.
"The idea is to have a single source of truth, and that's what blockchain technology will allow," Lee said. If this is the case, no reconciliation will be necessary, which will save a large amount of staff and thus improve the profitability of financial institutions and other complex organizations, he said.
Drane said the blockchain's real-time data control potential means that employees can be re-proposed for other activities.
"In general, regardless of whether you are an internal auditor of a large company or if you are an external auditor to a large audit firm," audit procedures will change, he said.
How regulation must evolve
Lee said that the "non-believers" and the control bodies that have neglected the blockchain technology have "had to start believing in this" because it is not going away. This includes the Financial Accounting Standards Board and the International Accounting Standards Board, he said.
Drane said that "if you want mass adoption of the [crypto] asset class, in a broad sense, you must be able to … allow the human being from the other side to easily pay the fees for the transactions. "
One problem is that cryptocurrency platforms might consider the transfer of a digital asset as a disposal, which is a taxable event, even if the consumer might think otherwise, Drane said.
Muroch said that people who received cryptocurrency launches could be subject to taxation, even if they did not want the air tokens. However, trying to "convince the IRS [that] you have something and you do not want it "could be a challenge, he said.
How back and middle office should manage data
With regard to back-office and middle-office processing, Drane said that organizations must focus on the bases for data acquisition and processing in an appropriate manner, but great complexity is present in every phase of this process. The "thesis" of Libra, he said, is that it is better to build crypto-native solutions to deal with such complexity rather than upgrade existing systems.