Blockchain – what you should know

29th May 2019
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Blockchain was devised to deal with the problem of trust between people and businesses across the impersonal medium of the internet. If you don't know whether the person you are dealing with is a dog or not, how do you ensure the security of the money, securities, information or other valuable assets you propose to transfer to them? Blockchain seeks to answer that question.

Blockchain creates trust between parties by having multiple encrypted copies of the same information spread across the internet. Everyone in the "chain" has visibility over every part of the transaction or exchange taking place. Blockchain creates a chain of files all linked by cryptography: if someone attempts to tamper with one of the records in the chain, everyone knows about it. The blockchain concept has great potential for all transactions or operations that involve the transfer of data across the internet.

The key opportunity is to become an expert in this niche sector as a career development opportunity. As you might have already noted, major consultancies and financial services companies are getting involved in developing business applications for blockchain technologies. Appropriately skilled finance specialists will be needed in these projects. Additionally, there is a small but fast-paced market for accountants to advise firms on ICOs and help them stay on the right side of the regulators. Fraud prevention, forensic accounting and anti-money laundering are also growing fields where accountants can thrive.

In a broader sense, accountants and finance professionals need to be aware of developments in ICOs, cryptocurrencies and blockchain so they can advise their employers and clients accordingly. All the accounting institutes now offer professional development in these areas. Accounting systems are beginning to take on ideas from the blockchain approach and accountants need to keep abreast of these. In addition, cryptocurrencies may become a more widely used medium of exchange for business transactions, increasing the weight of knowledge required about these currencies, and their regulation; and increasing the need to very tight anti-money laundering and fraud-protection processes.

There is also the ethical duty of accountants to report potentially fraudulent or criminal activity. Blockchain technology may help lessen the possibility of fraud by offering the protections of cryptography and multiple copies of distributed ledgers (the blockchain). Nevertheless, some aspects of blockchain (and, in particular, cryptocurrencies) decrease the transparency of financial transactions and hide the identity of the players in the transaction. Dubious deals and dodgy transactions may become harder to spot. This increases the pressure on accountants to hone their personal "radar" and beef up their due diligence procedures. Accountants must prepare to be more proactive in reporting of activities that they consider may contain the possibility (but not certainty) of criminal activity. It will become increasingly less easy to spot criminal activity, meaning that accountants will have to get used to flagging up "grey areas" that they are not sure about. A failure to report such "grey" issues may have career-limiting consequences!

The ACCA report, ICOs: real deal or token gesture?, provides a suitable quote to close on:

"These factors all point to change but also create opportunities for accountants: to be a part of the emerging distributed ledger landscape, to help innovation and drive technological ideas to commercial success, and to advise entrepreneurs on options for making this happen, in a landscape where regulation is expanding and ethical advice is essential."