Home Market The accountancy profession needs to better understand cryptocurrencies

The accountancy profession needs to better understand cryptocurrencies


Anyone who works in the City, or any finance related field, will already have faced plenty of questions from family, friends, and clients about bitcoin.

Interest in the cryptocurrency – and others such as ripple, ethereum, and litecoin – has exploded over the past year, as soaring prices attract many casual investors and speculators.

Such currencies often make a virtue of the fact that they are decentralised from central banks and formal financial institutions. As a result, many professional accountants may feel that their main focus remains on the world of traditional fiat currencies.

Read more: Cryptocurrencies: the rise of decentralised money

But as broader interest in cryptocurrencies grows, they are playing an increasingly important part in mainstream business. Last week, for instance, Santander announced it would be incorporating a ripple-based international payments system.

That is why the Association of Chartered Certified Accountants (ACCA) last month decided to issue new guidance to members around cryptocurrencies, to ensure that they are aware of their ethical responsibilities in the field.

There are growing concerns that cryptocurrencies are fuelling financial fraud worldwide, specifically money laundering. Europol, the EUs top law enforcement agency, has suggested that up to £4bn could be currently laundered through such digital transactions, and expects that figure to rise quickly.

The UK government recently announced the creation of a crypto task force to examine the path ahead, although City minister John Glen MP stressed it would take an “agnostic approach” to possible regulation. The Financial Conduct Authority has planned a review for later in the year as part of their task force role.

The need for new regulation acknowledges that blockchain and cryptocurrencies are important, and have great potential to be used in a positive way. But it also highlights that criminal activity must be addressed.

The global accountancy profession has an important role to play in enabling stable economies where consumers are not exploited. As new technologies become adopted, it is vital that professional accountants develop their digital understanding alongside their ethical responsibilities to flag areas of concern.

Risks in a digital age

Cryptocurrencies differ from traditional currencies in that their supply is not controlled by a national government. They generally operate on a digital peer-to-peer basis, with encryption tools being used to ensure that payments occur correctly between the designated source and recipient.

Bitcoin, for example, has at least three dimensions that are causes for concern. Its pseudonymous nature means, while its possible to identify the address a payment goes to, it is still not possible to confirm the identity of the beneficiary.

This is an obvious risk for money laundering, terrorist financing, and the funding of other types of illegal activities.

Second, bitcoins high volatility makes it inherently risky and unstable.

Third, it is funding a speculative bubble in other areas such as Initial Coin Offerings (ICOs), with investors chasing poorly formed business propositions.

The underlying blockchain (distributed ledger) technology behind bitcoin could revolutionise how financial transactions take place, and have a positive impact on business globally. This potential needs to be viewed separately from the risks of bitcoin, and professional accountants can play a key role by ensuring they develop the knowledge and skills necessary to understand this emerging area.


In the United States, the Securities and Exchange Commission last week charged two men with fraud for their role in an ICO which was endorsed by the boxer Floyd Mayweather Jr.

Innovation is crucial to the long-term success of a business, and ICOs are a useful way of funding blockchain-based innovation. An ICO investment is made via a cryptocurrency, and investors get coins (tokens) instead of shares and, therefore, a number of ICOs fall outside existing securities regulation.

ICOs have become popular, because businesses can obtain new funding with less complexity and greater speed than traditional methods. Yet without the appropriate regulatory safeguards in place, it is also easy to fall victim to a scam.

In our recent report “ICOs: real deal or token gesture?” ACCA called for the need to balance risk and innovation as blockchain technology and cryptocurrencies mature and enter the mainstream.

ACCA supports a close relationship between regulators and the accountancy profession to ensure that a robust and fair regulatory approach is crafted which is refined as developments emerge, so that it keeps pace with digital innovation.

Professional accountants are often on the front line against illegal activity. Yet they also have a crucial role as a trusted strategic advisor for organisations, helping clients remain competitive in an age of technological disruption. To perform this dual role, they must ensure they have a firm grasp of digital innovations and the ethical judgment to do the right thing.

Cryptocurrency is only one example of the possibilities for finance opened up by blockchain technology. There may be many more to come in the near future, and each will require careful evaluation of the possible risks and benefits.

While the long-term value of cryptocurrencies remains unclear, its obvious that the accountancy profession needs to lead when facing ethical dilemmas in a digital age.

Read more: We must not tarnish blockchain with the bitcoin brush


Please enter your comment!
Please enter your name here