Does the thought of how blockchain will affect accounting keep you up at night?
If blockchain and cryptocurrency are triggering words for you, stick around! Much of the publicity surrounding cryptocurrency leaves out information about how blockchain works and its effect on accountants. This article will address the possibilities of using blockchain in accounting and what you need to know about crypto as a CPA.
We here at Gusto are proud to team up with CPA Academy to shed some light on blockchain and how it factors into accounting. The informative webinar, “How Blockchain will Destroy the Accounting Profession: It Won’t,” takes a deeper look into questions about blockchain under the guidance of Greg Kyte and our very own Caleb Newquist.
Greg Kyte is the founder of Comedy CPE, which offers professional development with a comedic twist and has been named in Accounting Today’s “100 Most Influential People in Accounting.” Caleb Newquist is the Editor-at-Large at Gusto and the founding editor of Going Concern.
In this article, we will cover blockchain accounting, the evolution of the accounting profession, and the cybersecurity surrounding blockchain and cryptocurrency. Let’s get started!
Blockchain accounting: what are the possibilities?
As the influence of cryptocurrency and blockchain continues to grow, accountants have opportunities to research the subject and use that knowledge to evolve. The innate ability for accountants to unravel complex problems renders them able to analyze the way blockchain fits into the traditional financial realm:
There are people who desperately need more accountants with expertise in blockchain, and they’re paying them a lot of money to do a lot of the work behind the scenes to set up blockchain technologies. They make sure [the systems] are working right and that things are being classified and valued correctly. There are jobs out there if you’re willing to take the time to become an expert in blockchain and cryptocurrency.– Greg Kyte
The growth of cryptocurrency continues to produce new tax laws surrounding it. The demands of the new rules also open opportunities for growth within the realm of tax accounting. Tax specialists have a unique opportunity to integrate the legislation surrounding blockchain with current knowledge and practically apply it to their profession:
There are already tax firms that need people at that tax company to know how to accurately report taxes for changes in the values of cryptocurrency. [Blockchain and cryptocurrency] didn’t come and destroy our profession. They are actually giving jobs to people.– Greg Kyte
The built-in record-keeping of blockchain also offers the opportunity for accountants to simplify menial tasks. As transactions occur within the blockchain, the blockchain securely records and stores each transfer. Broadly applying blockchain to transactional accounting could dramatically streamline the process:
Blockchain is a continuance of where things are headed. Transactions happen all day, every day, [and] I don’t think anybody got into the accounting profession [because] they like doing highly repeatable mundane things.– Caleb Newquist
Instead of taking jobs within the accounting industry, blockchain and cryptocurrency are giving accountants the ability to grow. The growth provided by blockchain allows for new specialties and an expansion in the realm of tax accounting. Consequently, cryptocurrency offers the accounting profession an opportunity to evolve.
The evolution of the accounting profession
New, revolutionary ideas constantly arise for accountants. These ideas often gain inflated expectations and become viewed as something with the potential to upend the accounting profession. However, that rarely becomes the case because of the vastness of accounting:
I relate blockchain to my microwave in my kitchen. Ask me how a microwave works; I don’t know. Ask me if I can work a microwave, and I can work a microwave. It’s going to be the same thing. Some people are microwave experts and technicians who can fix or make a microwave. [But] I’m not that guy. That’s not what I chose to add value to our economy. I chose something else to do, but I still know how to use a microwave.– Greg Kyte
Technology is constantly evolving, and the accounting profession needs to move with it to stay relevant. With artificial intelligence and machine learning on the rise, accountants need to find ways to employ them advantageously. Embracing technology encourages accountants to find new ways to add value to the profession:
You need to be looking for ways that you can add value because there are a lot of ways that automation, machine learning, artificial intelligence, and those sorts of things are going to take away some of the tasks we’ve generally been able to charge to a customer. … What you need to be doing is looking at what’s coming down the pipe that you can jump on.– Greg Kyte
In cryptocurrency and blockchain, accountants establish the link between how the future of currency will integrate into financial society. Every accountant may not specialize in blockchain and cryptocurrency, but gaining knowledge of the process is beneficial. The systems established within blockchain offer accountants ways to tie them into their techniques to become more effective:
Blockchain is just a natural extension of where transactional accounting was headed anyway. Not only can we use things like artificial intelligence to automatically book things and code things so we don’t have to do that anymore, the transactions themselves can be verified and codified by using a decentralized ledger system. [As a result,] it helps prevent fraud and misappropriation.– Caleb Newquist
As accounting evolves, recording systems shift toward increasingly digital means. The security within the blockchain could deliver a way for accountants to establish more secure records. The cybersecurity provided by blockchain may answer many questions surrounding the financial market, but every system has flaws.
Blockchain cybersecurity: is it safe?
Much of blockchain’s security lies within the complex mining and verification process. The mining process involves an entire community working to solve a complex problem, and as a result, the information spreads itself between the servers throughout the ecosystem. The distribution of data establishes redundancy by creating multiple locations to access the information, which makes the system difficult to infiltrate and also protects the record from being harmed by physical destruction:
If I’m one of the miners, and I’ve got all this stuff on my server, but my building burns down, and I lose my server, it’s not a big deal because there’s up to several thousand other people that have the exact same record that lives on their server independent of everybody else. … There are so many things that blockchain takes care of on its own.– Greg Kyte
The sophisticated nature of blockchain generally keeps people from trying to infiltrate the system, but crime tends to adapt to the systems it wants to exploit:
Crime is about to get increasingly sophisticated. If people want to steal your stuff, they’re going to figure out a way.– Caleb Newquist
Generally, blockchain provides an incredibly secure way to transfer cryptocurrency. The system produces heavily reviewed and highly verified techniques. However, the security of blockchain still risks exploitation:
It’s very anti-chicanery technology for sure, although it’s not completely [impenetrable]. There are still asset-misappropriation problems. In 2019, there was a $40 million Bitcoin heist. … If you’re able to hack into someone’s Bitcoin account, you can start paying yourself tons of Bitcoin out of their account. … There’s still cybersecurity issues with blockchain that don’t go away just because it’s blockchain.– Greg Kyte
Blockchain ecosystems will constantly need to adapt cybersecurity measures to stay safe against an increasingly sophisticated breed of criminals. Virtual security systems work similarly to physical security systems because many times, problems have to arise before they know how to respond to a situation. Overall, blockchain systems contain built-in, high-level security, and that security will improve as they fight off those who try to exploit them.
Learn more about the impact of blockchain in accounting
As the world of blockchain and cryptocurrency continues to advance, its influence will grow as well. However, its practicality will ultimately determine its effect on the accounting profession. The complexity within the system and the lack of subjectivity could keep it from having a significant impact on accounting:
I think there are limitations of [blockchains] actually being able to be implemented. … The idea that it’s really going to be a huge tectonic shift within our profession is very, very small.– Greg Kyte
If you want to learn more about blockchain’s influence on accounting, check out the entire webinar here. Also, if you want to learn more about the world of blockchain and cryptocurrency, be sure to check out Part One and Part Two of this webinar article series.
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