Is there anything good about Bitcoins at all? Unless you happen to have become an overnight Bitcoin billionaire, the answer should be a definitive "no", particularly if you are a practising accountant.
Until last week, I had largely allowed the Bitcoin revolution to pass me by. However, a series of news stories have made the topic seem a little racier. The first related to some American brothers who have just become Bitcoin billionaires by investing almost nothing and then watched the value increased about 1,000 fold (I think) to $11,000 per coin.
This is clearly good news for them, but almost every other aspect of the tale smacks of the kind of nightmare that any self-respecting accountant can easily do without.
In fact, I would suggest to the various accounting bodies that rather than going to a lot of trouble in creating fiendishly complicated cross-disciplinary questions for their final exams next year, they could save time by using the far simpler: "List all of the problems that Bitcoins present to you as an accountant and provide detailed reasons for your answers".
The only issue here is that some firms might object to having their students withdrawn from the office for the fortnight that even the brightest would take to answer the question with any degree of completeness.
Here are a few hints to those who might be sitting this exam next summer.
- Any client who has a stash of Bitcoins might well have been involved in some kind of illegality. As a result, it may be necessary to inform the authorities (without tipping off your client) that you suspect criminal behaviour.
- Bitcoins and money laundering seem to be the closest of cousins. Therefore, any client who is involved in trading in them must at the very least be regarded as under suspicion of laundering money. Once again, this will cause you untold problems and require a visit to the firm's MLRO.
- If your remit includes signing off an audit for a company, the job of verifying the existence and ownership of these elusive little assets might be your first significant stumbling block.
- There is a further auditing nightmare lying in wait for those charged with auditing a company that has substantial investments in this a serial cryptocurrency, given that prices seem to fluctuate by 10% or more from hour to hour. How on earth you are supposed to value a company that has these on the balance sheet is beyond me. However, at least this could provide some entertainment for those behind I FRS and auditing standards.
- In that bitcoin's do not really exist, it would be very easy for them to be left out of tax calculations (perish the thought). Even if a client has the good grace to bring them into account, they might well argue with you about whether their assets and the profits from dealing in them should be regarded as tax-free gambling profits, capital gains or, the likely view of HMRC in many cases, trading income.
- There was a fascinating story spreading across the media last week about the ease with which Bitcoins can facilitate fraud. A stream of victims claimed that they had purchased piggy banks full at vast cost only to find that those to whom they surrendered thousands of pounds disappeared off the face of the earth.
Forget about clients, you could come a cropper on this last one, if greed ever becomes too powerful a temptation, when all the stories of ludicrous increases in value mount up.
I fear that this article is merely scratching the surface, and far more nasties will emerge over coming weeks and months before the equivalent to a South Sea bubble or dot-com collapse hits the Bitcoin market and its investors.
Having said all of this, if any reader wishes to send me a few Bitcoins for Christmas, they welcome to do so, care of AccountingWEB.
About The Imprudent Accountant
Someone who should know better, but can't resist the occasional rant about the more exasperating aspects of the accountancy profession.