Blockchain Bitcoin: Why the accounting profession should take notice
Since Bitcoin was founded in 2009, the cryptocurrency has had many ups and downs. At the time of writing, Bitcoin is sitting above $10,559 per token, yet predictions regarding Bitcoin’s future run the gamut, from heavy optimism to extreme reservation.
On one hand, Charlie Shrem, founder of the first Bitcoin exchange – Bitinstant – thinks anyone who can purchase a Bitcoin token under $100,000 is getting a bargain. However, in contrast, JP Morgan Chase CEO Jamie Dimon has stated Bitcoin is a “fraud” that will eventually blow up, comparing the cryptocurrency to the infamous tulip bulb market bubble in 1637.
Regardless of Bitcoin’s future, the underlying technology is where its true disruptive power lies. Known as the blockchain, this technology is the catalyst of the cryptocurrency boom. It also is the foundation for the birth of initial coin offerings (ICOs), which is creating widespread buzz within most industries as well as several governments. There is no doubt that Blockchain will shape the future of payments.
Shift in the accounting profession
Blockchain will revolutionise the recording of transactions. Using current practices, most audit clients take a week or more to close their month-end books. With blockchain, this can be done within hours.
Further, smart contracts will reshape how payroll managers track vesting schedules, EBP-related compliance and identity. Accounts receivable and payable will no longer need to be vouched - the data on the blockchain ledger indicating that Company A actually owed Company B is already verified by the majority consortium. The result: significant reduction in testing procedures, saving time on both of these major accounting cycles.
Such conditions are challenging how accounting firms adapt audit approaches. In short, the shift from “ticking and tying” to “big data” will be significant. While this will not happen overnight, a future generation of aspiring CPAs who can visualise big-picture accounting concepts and interpret “big data” will be in high demand.
The rise of blockchain raises another concern – will we need accountants in an automated world? Many firms, especially audit-heavy ones, will need to consider other value-add advisory services such as consulting or business process improvement.
Companies who are slow to adapt and brace for the disruption of blockchain could face significant downturns in economic growth.
Look no further than the early 90s when the internet altered how the public viewed information. In the 21st century, blockchain technology will certainly change how the public views trust. For auditors, the primary task is to be a third-party validator of trust.
With the blockchain shifting how the public trusts, there are many questions: Will audits even be needed in the future? What role will the CPA profession hold in 10 years? Will you be prepared for the change or fall behind?