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A link in the blockchain

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8th Jan 2016
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Accountants have an important role to play in one of technology's most exciting sectors. Bitcoin - and specifically its underlying blockchain technology - has come very far since it first appeared in 2009. It has transformed from a digital curiosity into a vibrant commercial eco-sphere in which accountants can thrive.

Bitcoin is a digital currency, essentially a payment system, based on the blockchain concept. The blockchain is a tamper-proof, chronological database that allows people to check that the bitcoins being spent haven’t been spent before. Its ability to record transactions means it can monitor the exchange of anything that holds value - not necessarily just bitcoin or cryptocurrencies.

Eddy Travia, chief executive of bitcoin investment specialist Coinsillium, has seen the sector expand rapidly. “When we started looking at the space on start-up investing platforms in 2013, there were maybe eight or 10 that were looking at bitcoin. And now there are more than 1,000. And some of them get funds from Goldman Sachs, NYSE, NASDAQ and big banks like BBVA,” he told AccountingWEB.

The businesses operating within the bitcoin sector are very diverse. And in turn, the clients of these businesses are often small companies looking to save on costs. “For example, we have a company in our portfolio that helps SMEs pay their suppliers in China,” he said.

“These are small entities, and for them the relative cost of sending money abroad in proportion to their overall expenses is much higher than a large company’s.”

According to Travia, these start-ups are desperate for accountants who understand cryptocurrencies. “If these companies either use bitcoin or accept bitcoin, they need the accountant to understand the concept and understand how it works in terms of value that fluctuates compared to the local currency. Then it goes into compliance, regulations and how it is classified.”

Accountants working with cryptocurrencies have to deal with some curious side effects: machines can hold bitcoin and machines can pay machines. “That could have some interesting ramifications for accountants when the internet of things really gets going,” said Travia.

For accountants who want to get educated, there are myriad online resources. For the less digitally inclined, there are also real world introductory CPD courses (like the one offered by Coinsillium).

Media hype has been growing around blockchain, with many expecting the technology to go mainstream in 2016. Innovations like the launch of the first bitcoin debit card have spurred the enthusiasm. For a new generation of entrepreneurs, bitcoin and blockchain is a normal part of business life.

“As with any technology, it is meant to have a very long-term impact,” said Travia. “It’s not just going to be the fashionable thing in 2016 and then in 2017 we move onto something else. It’s not that kind of technology. It can have a profound impact on how companies and the public sector can manage their transactions and ledgers.

“Bitcoin, not only as a currency, but its technology blockchain is a serious contender for cross-border payments and payments in general. You have governments and financial institutions looking very seriously at it.”

Bitcoin comes with a significant stigma attached thanks to less savoury exponents like online drugs bazaar The Silk Road. Travia is keen to dispel this perception: “The media have inflated cryptocurrencies’ reputation. The only governments that would have a hard stance are frankly not that important on a macro-economic level.

“The large majority of bitcoin exchanges [bitcoin equivalent of banks] around the world are extremely strict on AML-KYC [anti-money laundering and know your client]. They’re at least on the same level as a bank. So there’s no issue in terms of the usual money laundering concerns,” concluded Travia.

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By waltere
14th Jan 2016 15:32

Wishful thinking?
Mr Travia has put a very positive spin on the situation but I'm not sure it's actually supported by the facts. The U.S. government's position seems pretty clear.  For example, under the headline "U.S. government is calling bitcoin anything but a currency", Fortune reports that:  "the Commodities and Futures Trading Commission for the first time finds that Bitcoin and other virtual currencies are properly defined as commodities [not currencies]”  See http://fortune.com/2015/09/18/bitcoin-currency/  So when Mr Travia says "The only governments that would have a hard stance are frankly not that important on a macro-economic level." is he really including the world's largest?  Hmmmm.  I think I might leave it a while before rushing down to the Post Office to convert my sterling to bitcoin!  See also https://en.wikipedia.org/wiki/Legality_of_bitcoin_by_country for a country-by-country round-up of government opinions.   

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