A World Economic Forum report has estimated that by 2025 about 10% of the global gross domestic product will be stored on the blockchain. This is an indication that there will be a transformation of the way transactions are both recorded and communicated in the coming years. Thus accountants need to educate themselves both on the blockchain technology and digital currencies.
By being thoroughly familiar with virtual currencies and the blockchain technology accountants will be in a better position of assisting their clients. As cryptocurrencies grow and become more accepted, for instance, more and more business owners will want to start adopting these digital coins as a medium of exchange. Accountants will therefore be required to be in a position of advising their clients whether they should take that step, what the implications will be and how it will work.
Loss of value
Due to the volatility of cryptocurrencies accountants will also be required to know how they can shield their clients from potential loss of value if they are accepting digital coins as a mode of payment. This is already possible since there are merchant accounts which convert virtual currency payments immediately into fiat currencies thereby protecting businesses from the volatility associated with digital coins.
Besides accepting cryptocurrencies as a mode of payment for goods and services, there are also those organizations which are exploring the use of cryptocurrencies in paying their suppliers or employees. In the United States for example accountants will need to be aware of the IRS reporting requirements in case their clients decide to go this route. This is because cryptocurrencies are not exempt from tax laws since they are treated as property and there is thus a capital gains tax applicable to them when they are exchanged to fiat.
Crypto accounting standards
One of the first countries in the world to develop an accounting standards for cryptocurrencies is Belarus following a decree from the country’s finance ministry. The decree will not only allow for the accounting of cryptocurrency transactions in a more streamlined manner but will enable businesses that have integrated digital coins in their business model to easily file their taxes.
In the decree it is stipulated that all token purchases are to be mentioned explicitly in the tax files either as settlements from different creditors and debtors or as other expenses and income. Startups that are unveiling crowdfunding events or private token sales are under obligation to inform the national financial regulator of Belarus the cost of the tokens. The rule only applies to the private sector as government departments and agencies cannot undertake such activities.
Initial Coin Offerings
When tokens are acquired via Initial Coin Offerings, the decree states that they will be deemed to be investments. In cases where the circulation period of a coin is more than 12 months then they will be deemed to be long-term financial investments.
For altcoins that are purchased through online exchanges or traders for future business needs, they will need to be accounted for in the credit sector as goods and in the debit section as settlements with contractors and suppliers.
Digital coins obtained via mining are to be accounted for as primary production in the credit tab and finished products in the debit account.
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