Cryptocurrency is an intangible digital token that is recorded using a distributed ledger infrastructure called “Blockchain”. In recent years, cryptocurrencies (mainly Bitcoin) have become increasingly popular among companies and individuals.
Because cryptocurrency is designed as a medium of exchange, any move towards the use of it is likely to have significant ramifications for the accounting profession.
Continue reading to find out how cryptocurrency will impact accountants and how accounting firms can prepare for its arrival.
When Bitcoin first emerged in 2009 it was mainly software engineers who took note. Since then cryptocurrency has become increasingly popular, opening up new ways to think about everything from exchanging valuable assets to transfers of coin ownership. Bitcoin was the first cryptocurrency to gain the public’s attention, but since several other digital currencies have appeared on the market such as Etherium and XRP.
Because cryptocurrency opened the world’s eyes to the flaws in the current way we make and keep track of value exchanges, the technology has the power to transform the accounting industry. While it’s unclear how these deep technologies will affect us in the long-term, accountants need to understand them to keep up with a fast-changing industry.
As cryptocurrency becomes more widely understood and accepted, we’ve seen several businesses start to use it. Here are four major companies currently accepting cryptocurrency:
- PayPal recently joined the cryptocurrency market, allowing their customers to use Bitcoin, Etherium, Litecoin and Bitcoin Cash (as Bitcoin spin-off) to pay and sell goods on the 26 million sellers that accept PayPal.
- Overstock.com started accepting cryptocurrencies in August 2017, including Bitcoin, Etherium, Litecoin and Dash, using a digital asset exchange company called ShapeShift to convert currencies through blockchain.
- Expedia accepts cryptocurrency in the form of Bitcoin. Although, buyers should be aware that once you begin a transaction with Expedia using Bitcoin, you can’t cancel it.
- Shopify allows customers to set up their own online shop through Shopify much like other platforms like eBay or Etsy and became one of the first well-known companies that accept cryptocurrency (only Bitcoin for now) in 2013.
As more major corporations start accepting cryptocurrency as a payment method we see a steady stream of global brands follow suit.
Norwegian Air plans to start accepting cryptocurrency payments for plane tickets. According to the CEO of Norwegian Block Exchange (NBX), Stig Kjos-Mathisen, his cryptocurrency trading platform successfully developed a payment infrastructure that will allow Norwegian Air customers to buy tickets with cryptocurrency.
There are many reasons why an increasing number of companies across a variety of sectors choose to enter the cryptocurrency market. The mains reasons being:
- It’s Fast. Because payments are peer-to-peer, cryptocurrency transactions don’t need intermediaries such as banks which can delay the transaction processes while confirming sufficient funds are available. Cryptocurrency transactions are instantaneous taking just a few minutes to be approved.
- It’s Cheap. Cryptocurrency has lower transaction fees, which are minimal or in some cases completely free. Although few small businesses use cryptocurrencies regularly today, the lower costs are undoubtedly part of the motivation to accept this alternative payment.
- It’s Secure. Standard payment methods like credit cards require customers to share their name, address, card number, expiration date and CVS number. Cryptocurrency carries a degree of anonymity since it doesn’t require users to give up any secret information.
Cryptocurrency and Blockchain technology aren’t merely disrupting how we conduct business, but the demands on the accounting and finance industry as well. The rapid rise of cryptocurrency transactions has left governments around the world scrambling to provide guidance for proper accounting and taxation procedures.
At present, no real regulations to support cryptocurrencies exist yet. There are no common standards that explain how accountants should process them, meaning financial professionals are left with no alternative but to refer to other standards. The current trajectory of cryptocurrency shows that it will become astronomical when it hits the mainstream, meaning it’s crucial for financial professionals to start preparing for its big breakthrough.
- Facilitate collaboration. Encourage communication with the IT department to learn best practices for seamless integration of the new technologies.
- Relax the job requirements. Blockchain expertise is difficult to find but can be developed. When hiring for this type of role, focus on candidates who are fast learners and can be trained on it.
- Accelerate the hiring process. When you find the right candidate, move fast. Consider hiring through a specialist recruiting firm to gain access to more candidates and get assistance with your hiring efforts.
The problem many accounting firms face at present is a big talent gap between cryptocurrency and blockchain experts and the jobs that demand their knowledge. Candidates with blockchain skills are in high demand, and accounting firms should proactively hire for this expertise and provide sufficient training to get current employees up to speed.
As cryptocurrency use becomes more mainstream, the need for software specifically catered to it is greater than ever. Below are three of the best cryptocurrency accounting software platforms to make handling these digital transactions easier:
- Blox is a crypto-based social trading platform that helps users manage trading portfolios, maximise profits, and report for taxation purposes. The software has a variety of offerings for various levels of users from CEOs to Miners.
- SoftLedger is a financial management platform accommodating cryptocurrency for accounting and taxation purposes, which is easy to navigate. Transactions are automated, allowing real-time tracking and on-the-go financial reports.
- ZenLedger is a cryptocurrency accounting software with various features including trade history enablement, auto-fill forms, and taxation. While it’s more expensive, ZenLedger provides a global solution and quality support from true crypto-experts.
How cryptocurrency will affect accounting in the future remains to be seen, but there’s no escaping that it will become a part of most accounting operations and firms must prepare for it.
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