There was a time when many payments were done through barter and currencies came and went as new rulers took power. There was no such thing as a regulated market, yet, somehow, people managed. However, after so many years, we’ve grown used to regulated currencies and banks and governments controlling them. Now, digital currencies have changed everything we thought we knew about how money works, and many of us are struggling to understand them.
We’ve been hearing all sorts of things about investors making a fortune with bitcoin, businesses accepting payments in it, and people adding it to their super funds. We’ve also heard that bitcoin transactions are very volatile, and you can go broke overnight. So, with all this conflicting information, we accountants can be counted on to know all the facts, can’t we?
The catch with that is accountants are humans, too. (Yes, it’s true, but don’t tell anyone.) The truth is, unless your clients have been using cryptocurrencies for a while, you may not have had much to do with them yet. But, as the use of bitcoin and other digital currencies become more mainstream, they are going to show their face in your business, whether you want them to or not.
You’ve probably been fielding enquires about cryptocurrencies already, so let’s look at who has been, or will be, approaching you for advice.
Mum and Dad investors
These clients will probably start by asking you to explain bitcoin and blockchain process to them. So, you’ll need to be able to explain, in plain language, how digital currency works, how it can be bought or sold, and what it can be used for. They’ll also probably ask about how it can be used in super funds and how it can be taxed. Above all, you’ll need to know how to keep proper records of bitcoin transactions.
Warrick Pleash, partner/manager of Bitcoin Trader, gave an easy to understand explanation of how digital currencies work on the recent From The Trenches podcast episode What Does Bitcoin Mean For Accountants?
Buying bitcoin is no different to currency trading. Buying Initial Coin Offerings (ICO’s) is like buying shares in a company. They will need to have a sound investment/business model. Some start-ups have raised capital by creating their own digital currencies that investors can buy and then use in some way within that company only. For example, their currency can be used for a voucher-like system that allows them to purchase goods and services from that company. The trouble is, it can be hard to pick which of these companies have sound business structures and which could disappear tomorrow, when their currency would be worthless.
You can also explain the expanded range of investment and trading options available for those with substantial sums at their disposal.
Business owners and executives may approach you about the pros and cons for accepting payment in cryptocurrencies. The first thing to ask them is why they want to go down this pathway. They may have a valid reason and a clear business case already, but they also may be considering it because it seems like a good thing to do.
For many, it may be too risky at the moment. As the market is unregulated, cryptocurrency values can drop rapidly with little warning and there is no way to accurately quantify the value. You may want to suggest alternative options for them to consider.
What can you legally tell them?
As you are no doubt aware, unless you are a licensed advisor you can only provide information to your client. It is up to them to decide what they do with that information.
However, you do need to know how digital currency processes and blockchain work and what the legal and taxation implications are in your jurisdiction.
Where can you get your information?
There currently aren’t many officially-recognised blockchain qualifications available. Training in digital currencies for accountants is still a bit piecemeal. It is creeping into some courses from traditional training providers, but there are plenty of short courses and events on offer from smaller providers, financial consultants, bitcoin brokering firms, industry bodies, and accounting firms who have experience in this field. Government websites are another reputable source of information.
If you are looking for more Unique Value Propositions to help you stay ahead of the game, this is one area that could reap many rewards for you. So, you really have two choices. You can stick your head in the sand and ignore this opportunity because it’s in the ‘too hard’ basket. Or, you can step up, learn everything you can about blockchain processes then use your knowledge to establish yourself as an expert that people will seek out for help. Digital currency is here to stay, so it’s up to you to embrace it and discover how you can your clients can benefit from it.
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Many of the themes in this article came from Episode 45 What Does Bitcoin Mean For Accountants?
presented by Paul Meissner and David Boyer. Paul & David are passionate CA's who care deeply about the accounting industry.
Paul quit his accounting day job seven years ago and now owns and runs the Melbourne-based firm, 5ways Group Chartered Accountants, and his online Freedom Accounting System firm which allows him to travel and work from anywhere.
For the last 4 years, David has worked as a Virtual CFO. At the start of 2016 he co-founded the Virtual CFO Association and in December 2016 his company, Sequel VCFO began franchising to mobilise the experienced work force of accountants in industry and bring their expertise to SMEs.
Together with their impressive list of guest presenters, Paul and David are the brave souls needed to fight through the noise and give accountants in practice the support and information they deserve.
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