A new essay from the CEO of the International Federation of Accountants, an organization that boasts more than 2.5 million accountants and 179 member-organizations among its ranks, suggests that there is a growing belief in the industry that bitcoin technology could revolutionize fiscal and corporate governance.
The article, penned by IFAC CEO Fayez Choudhury, posits that bitcoin presents both opportunities and challenges for accountants, and argues that accountants are uniquely placed to help determine the role that bitcoin will play in global finance.
Choudhury suggests that bitcoin could reshape corporate financial ethics, saying:
“The traceability of transactions and nearly all forms of record-keeping tied to them could actually reduce fraud and force those in key financial roles to ensure responsible behavior in ways that ethical codes cannot.”
Ultimately, Choudhury issues a call for accountants to become more engaged with bitcoin to ensure that if the technology succeeds — which he says isn’t guaranteed, the broader economy is equipped to maximize its potential.
Revolution in financial trust
Choudhury points to the block chain as a transformative innovation, suggesting that digital currencies could change how trust exists in finance.
“As the bitcoin system relies more upon cryptographic proof than on human trust, its transparent processes may eventually require different audit procedures, given the complexity of the technological environment.”
Choudhury goes on to say that many areas of both consumer and business finance could be enhanced with bitcoin technology. He notes that investor accountability and consumer protection, in particular, could benefit from digital currencies.
Bitcoin may also lead to the development of novel business models, he says. It is for this reason that accountants need to educate themselves on bitcoin to ensure that fair corporate practices are upheld if and when digital currencies become more broadly integrated.
Challenges could undo digital currencies
Choudhury cites fraud and transaction controls as areas where bitcoin’s underlying technology could prove to be ineffective as a corporate finance tool.
“Bitcoin poses challenges that impact the financial reporting supply chain — including accountants, auditors and those in financial leadership positions.”
With the block chain existing as a public entity, companies may be able to piece together financial transactions from competitors. Saying that “anyone can monitor this information”, Choudhury states that corporate treasurers would need to create additional internal controls to ensure that bitcoins are properly maintained.
Additionally, he says that regulatory uncertainty in the areas of taxation, as well as the volatility in the price of bitcoin, may prevent some major players from getting involved.
Technology ‘here to stay’
Choudhury concludes by saying that bitcoin technology is already beginning to have a transformative impact on corporate finance.
At this point, he argues, it doesn’t matter if bitcoin actually succeeds long term, saying:
“There already are other virtual currencies on the rise and competing for market share. Given the challenges and opportunities — and the accountancy profession’s linkages with these issues — shouldn’t we be involved in the debates that shape the innovation, use and regulation of cyber-currencies?”
Choudhury concludes by stating that bitcoin is already bringing about change. He adds that whether or not companies and governments embrace the technology could depend on the role that accountants play in the spread of digital currencies.
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