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Crypto infiltrates accounting mainstream


Cryptocurrency technology that was a novel distraction in 2020–21 has quietly entered the mainstream in 2022, according to Sage.

27th Apr 2022
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While AccountingWEB contributor Helen Thornley has been reporting on cryptoasset tax developments since 2019, the starting gun for wider awareness was fired last year when HMRC pulled all its guidance together into a new crypto tax manual.

With an estimated 2.3m cryptoasset holders in the UK, it wasn’t long before the conversation turned to the challenges facing these individuals during the January 2022 self-assessment season, and the conversations and traffic have increased steadily on AccountingWEB ever since.

In March, for example, AccountingWEB member ireallyshouldknowthisbut asked about the FRS 102 accounting treatment for cryptoassets held as a corporate investment and was advised to include them on the balance as intangible assets. Shawnaodwyer, meanwhile, wanted to know at what point international cryptocurrency salary payments became taxable for income tax purposes – whether it happened when the assets were initially received or converted to a “fiat” currency (the latter, according to delriene72021).

As such questions proliferate, practitioners including Joe David from Myna and Adrian Markey have specialised in the sector. During a session on future trends at the AccountingWEB Live Expo in December, Soaring Falcon’s Alex Falcon Huerta and flinder’s Alistair Barlow, both said they have received cryptocurrency payments from their clients.

These anecdotal signals gained some statistical support recently from accounting software giant Sage, which polled 1,900 finance leaders (500 in the UK) for their views on crypto issues for a report looking at The Refined CFO.

Cryptocurrency payments

Like the practitioners already mentioned, 13% of UK finance leaders said their organisations currently accepted cryptocurrency payments. Another third planned to do so in the next year and 44% thought crypto would be “extremely viable” as a payment mechanism in the future.

A similar number (45%) had personally invested in cryptoassets. Just 2% of UK CFOs had no interest in investing in or using cryptocurrencies.

But the path to digital commerce is not without hurdles. The Sage CFO survey identified concerns among a quarter of respondents about cybersecurity issues and the environmental impact of cryptocurrencies, some of which are based on solving massively complex calculations to “prove” the digital asset’s provenance. The study cited an April 2022 average transaction electricity consumption rating of 2116 kWh, but pointed out that lower carbon alternatives such as Ethereum were emerging.

The rapid transition of cryptocurrencies from an early-adopter fad to a serious option for mainstream businesses illustrates how finance management is being redefined. Waiting in the wings are further disruptive technologies including artificial intelligence and the metaverse.

As the report noted, “In contrast to their predecessors, a redefined CFO may find themselves making crucial decisions for an ESG [environmental, social and governance] programme one day and devising a strategy for cryptocurrency adoption the next.”

Catch up with all things crypto in this week’s Tech Pulse webinar Crypto Client Confidential at 10am on Friday 29 April, in association with specialist software developer Koinly.

Replies (3)

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By Ian McTernan CTA
27th Apr 2022 15:55

The biggest issue with Crypto from a tax viewpoint is the sheer complexity of many of the transactions from a tax viewpoint and the relative dearth of systems which will handle all the various types of transaction- there are some out there, but none seem to cover everything.

Add in the many thousands of transactions some clients undertake switching between various asset types and throw in the likes of staking etc and it's quite a battle working out what the profit/loss that is taxable and what tax applies...or even just working out the value as at the year end!

It is a growing specialist field (and one I appear to be getting dragged into by various very teccy minded clients!) and all tax and accounts practitioners should ensure they have at least a grounding in the tax aspects of this area so they are aware when they need to seek guidance.

Thanks (1)
Replying to Ian McTernan CTA:
paddle steamer
27th Apr 2022 17:57

Or they can instead retire and grow tulips.

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By JustAnotherUser
28th Apr 2022 08:10

An article on Crypto that isnt scare mongering or filled with incorrect jargon, Bravo!

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