Accountants are the financial backbone of any good business, and the accounting world has always thrived as money evolved throughout history. As the future of finance slowly unfolds, cryptocurrencies like Bitcoin and Ethereum (two currencies my company is currently invested in) are leading the path toward mainstream acceptance of digital currency. Many businesses are looking for better ways to track, manage and account for crypto assets, whether it’s due to their rising interest and implementations, institutional investments into crypto and fintech (financial technology) or the supercharged growth that comes with it all.
Imagine a future where digital currencies are integral to daily life and blockchain-based transactions take place between people, consumers, businesses and maybe even governments. Imagine smarter cities around the world that create an economy powered by digital currency for buying groceries, paying bills, giving loans or buying a car. When attempting to anticipate the future, we can already predict that the potential of digital currencies is colossal. But to truly tap into that potential will require innovations in the finance and accounting industries.
The future of crypto accounting will be complex and constantly evolving, but the role of technology has opened new opportunities to develop solutions that solve industry challenges.
Blockchain and crypto continue to prosper.
The media spotlight has shied away from crypto since its peak hysteria in 2017 and 2018, but there are still millions of dollars being poured into the space. Startups raised $3.9 billion through venture capital funding in 2018, and ICOs (initial coin offerings) continue to prosper, raising over $21 billion in cryptocurrencies last year.
These numbers have spurred tangible ideas that solve real challenges, like scaling performance or consensus mechanisms that build trust. They’ve also introduced new ideas like decentralized finance, an interoperable financial loan and a lending system without governance from institutions and built to be transparent and easily accessible.
A similar rise in the fintech sector depicts blockchain’s entry into the fold. A recent survey reported a 22% increase in CFOs implementing blockchain tech in 2019 — up from zero in 2018.
As these industries continue to develop rapidly, they also begin to use their unique attributes to help each other. Blockchain could be used to track business transactions securely, for example, while a fintech company served as a customer-facing platform for banking or investing. The possibilities are endless, and blockchain technology makes new big ideas realistic.
Digital currencies will go mainstream.
Looking back at the evolution of currency, society has moved from trading and bartering to cash and credit, and now, today’s trends include cryptocurrencies and digitized wallets. Old science fiction books have oddly predicted much of the way technology would unfold, and digital currencies and credits were always depicted as the future forms of payment. It’s human nature to build what we dream of, and the current direction of currency and investments are becoming increasingly digital, borderless and less tangible.
There was a time when the concept of credit cards and online payments used to make people skeptical, but today, they are a standard method of payment. The birth of crypto similarly created skepticism that still lingers today. While many economists and experts debate the legal classifications of crypto, institutions and major corporations are investing heavily into blockchain or crypto-related projects, including the recent announcement of Starbucks partnering with Bakkt to let its customers better translate their Bitcoin into cash.
Additionally, urbanization has created a new type of city called smart cities, and blockchain technology is an exciting prospect for supporting payments, identities and even government services in these enlightened environments.
The moment cryptocurrencies become a legitimate form of payment, the potential for true day-to-day usage, acceptance and growth is exponential. When that day arrives, it will present a new set of challenges and opportunities.
The future of crypto lies in accounting.
When the landmark day of crypto beginning to live in the mainstream world, one of the biggest challenges will be tracking and managing crypto assets and transactions. This is inherently complex due to the cryptographic nature of cryptocurrency making it secure and immutable. People and businesses are looking for a way to record and manage their crypto assets and transactions in much smarter way. For example, if there’s a unified currency for North America alone, and it’s accepted at most traditional businesses, that would produce an exorbitant amount of transactions every day. That volume would rise dramatically if it included South America, let alone Europe and Asia. Handling volume on those levels is reserved for large international financial institutions, but with decentralization and fintech, it won’t always be that way.
Nowadays, there are hundreds of thousands of transactions per day. Should crypto go mainstream, that number would quickly jump into the millions. Businesses and individuals will look for ways to organize, track and manage their transactions quite like how people keep receipts for personal bookkeeping. Individuals will likely neglect best accounting practices, and businesses simply can’t rely on spreadsheets or traditional tools when accounting for a high volume of daily transactions.
This is where automation, blockchain and fintech come together to solve the problem. Individuals, businesses, and maybe even governments will be on the lookout smarter solutions for tracking and managing transactions, handling taxes and facilitating accounting operations.
For businesses and anyone else who owns cryptocurrencies, it is critical to be proactive with how you manage your assets for bookkeeping and tax purposes. The best strategy is to map out one’s accounts, wallets and exchanges in order to have a clearer picture of your crypto profile. It is important to always stay informed with the latest crypto trends, news and changes to compliance and crypto taxes.
Today, there are more and more crypto accounting firms and management platforms available to solve crypto accounting challenges, no matter how big or small. Many don’t even know that there are numerous platforms capable of tracking, managing and organizing assets easily in one unified place. While it may seem like a daunting task, implementing the right technology for your professionals or businesses can mitigate the steep learning curve and provide peace of mind.
The future potential for crypto is clear. Cryptocurrencies will be the standard, universal means of transacting in some shape or form. While the timing of this arrival remains unknown, the future of crypto accounting is bright. This push from the fringes into the mainstream will be the most opportune time for companies to build real-world solutions for these emerging industry challenges.