Merriam-Webster dictionary defines blockchain as a digital database containing information (such as records of financial transactions) that can be simultaneously used and shared within a large decentralized, publicly accessible network. In this article, the author predicts blockchain trends and its impacts of the accounting profession.
With a new year comes changes across multiple facets of the accounting vertical, and there has arguably been no trend and tool that has dominated the accounting conversation more than blockchain technology and its applications. Since its launch from obscurity to the mainstream business and accounting conversation, blockchain and its applications—including Bitcoin and other cryptocurrencies—has continued to dominate technology headlines and the broader accounting conversation. The sheer amount of development and number of changes that have occurred in this space can make even the savviest CPA feel a little overwhelmed. Predicting the future is always a difficult endeavor, especially when it comes to such a fast moving and rapidly changing space such as blockchain, but hopefully these trends and themes will be helpful for practitioners seeking to navigate blockchain and its applications.
Blockchain will become more mainstream and more boring as enterprise and commercial implementation continues to accelerate. While blockchain might have originated as a decentralized and distributed alternative to centralized and well-established data processing organizations, the reality on the ground has continued to shift. No matter what economic sector or industry is analyzed, an underlying change continues to accelerate; permission-less blockchains are increasingly being replaced by permissioned options. Both versions of blockchains have use cases, but as larger organizations develop and implement internal versions of blockchain, primarily for back office data processing, blockchain continues to become simultaneously more mainstream and more mundane.
Accounting professionals with clients of all sizes will need to have a working knowledge of blockchain, as well as the confidence to offer advice and guidance. It is true that the majority of implementation to date has occurred at large organizations such as JP Morgan, Walmart, and IBM but with these, and other, rollouts continuing to transition from beta versions to fully operational ones, supply chain partners. In other words, even if a specific client is not developing or implementing blockchain at this time, they will most likely become a part of a larger scale blockchain platform in the near term. Having the expertise and confidence to convey the expertise about how to integrate blockchain with existing technology tools will transition from a “nice to have” to a “must have” for practitioners.
Interoperability and internal controls will move to the forefront as blockchain platforms and options become more commonplace. Building on the first two points, as blockchain platforms and applications become more commonplace and mainstream, there will be an almost inevitable increase in the number of potential issues and risks related to these applications connecting to existing technology tools. Especially for organizations operating in industries that handle personally identifiable information—everything from healthcare to payment processing—securing customer data is of paramount importance. Given the fact that many of the breaches and hacks in the blockchain space have happened at the virtual on-ramps and off-ramps, i.e., where blockchain connects to other technology, establishing effective controls will be a hot topic moving forward.
Regulators will most likely have a more prominent role in the blockchain ecosystem moving forward, building on the more proactive role many have taken during 2019. With the IRS—finally—issuing some updated information and guidance connected to crypto asset taxation in October 2019, the trend toward more iterative guidance seems clear. The CFTC appears to have positioned itself, for example, as the primary regulator for cryptocurrencies, but still makes public note of the fact that it will rely on the expertise and information generated by the SEC. On top of that somewhat muddled market shift, there are dozens of other regulatory agencies seeking to establish frameworks and guidelines for commercial and retail users of cryptocurrencies. It is far too early to speculate as to how this will ultimately play out, but it is safe to say that 2020 will undoubtedly have more regulatory updates. Keeping up to speed with the relevant changes represents both a challenge and opportunity for both individual practitioners and firms in the accounting space.
New roles and functions for the accounting space at large will continue to develop in audit, tax, and advisory areas. Blockchain is already having a dramatic change on how audits are performed, with several of the larger accounting firms already having rolled out audit tools powered, or able to work in conjunction with, permissioned blockchains. These tools, however, are just the tip of the proverbial iceberg, with entirely new roles coming on the horizon. Smart contract auditors, control specialists, mediators for smart contract disputes, and a number of roles connected to consortium blockchains are just a few of the new opportunities that are beginning to emerge. Serving as another tool for practitioners to leverage, blockchain implementation will eliminate certain existing functions but will also lead to the creation of entirely new opportunities.
This past year was certainly an exciting and fast-moving year for the blockchain and crypto asset space, and that pace of change and development seems set to accelerate as the calendar flips ahead to 2020. Failures will occur, companies will go out of business, and adoption of blockchain—like any other emerging technology—will come in fits and starts. Some of the sheen and buzz may have subsided alongside cryptocurrency prices, but that should not be seen as a negative development. Rather, the decline and continued lower levels of cryptocurrency prices has allowed organizations and firms to instead pay attention and focus on enterprise development and implementation. As enterprise and commercial applications continue to permeate the economy, practitioners should view this as an opportunity to expand current services and develop new ones as well. There is no monopoly on good information or new ideas, and blockchain represents—perhaps—the greatest opportunity for firms of all sizes to compete on a level playing ground.
Garrett Wagner, CPA, CITP, CEO and Founder of C3 Evolution Group, is an industry thought leader and on a mission to fuel the entrepreneurial spirit and passion within the industry. With his ability to break free from the traditional CPA box, he has embraced the entrepreneurial mindset and is on a mission to help others embrace the entrepreneurial skills and knowledge needed to evolve into entrepreneurial CPAs. Mr. Wagner focuses on monitoring the evolving technologies and best practices in the industry to achieve the highest degree of success without being afraid to break free from traditional methods. His background includes working inside successful CPA firms, speaking at conferences and events, and consulting for CPA firms across the country helping them to ignite lasting change by understanding the unique needs of each firm’s organization.