With the acceleration of the Web3, the innovations brought about by blockchain technology require accountants and software publishers to adapt or risk being quickly overwhelmed …
Web3 rethinks the accounting function
Web3 and its blockchain-based applications (DApps) are creating an independent and decentralized financial system, alongside the traditional banking system. In this ecosystem, individuals and businesses carry out transactions almost instantly (purchase, credit, loan and investment) without resorting to banks. Accounting professions have to deal with digital assets (cryptocurrencies and non-fungible tokens (NFT)) stored in virtual wallets (such as MetaMask) and “Exchanges” (Binance, Coinbase …). This paradigm shift involves a revolution of actors and accounting practices in 4 directions.
1. Develop a culture of “crypto-accounting”.
The challenge for an accounting department is to transform itself into a “crypto hub” able to face and anticipate management problems for its customers. To do this, it is essential to find the best talents inclined to master crypto-accounting. Accounting firms also need to make their Copernican revolution and develop this expertise internally. Crypto-accountants need to be up-to-date with tax and legal regulations, but also understand DeFi (decentralized finance), its ecosystem and its codes.
2. Take ownership of the cryptographic accounting tools
Since many Web 3.0 transactions take place outside the traditional banking system, accounting firms need new tools that automatically interact with their traditional accounting system. In fact, currently few ERPs are capable of effectively managing digital asset accounting. New problems can arise such as the differential between the cost of acquiring a token and the price at which it is earned, sold or traded. This requires the extraction of data from different sources and the appropriate tax treatment for each transaction. Therefore, accountants must learn to use new platforms such as Gilded, Bitwave or Tactic…. The latter have advantages in the fiscal and accounting management of cryptocurrencies. Specifically, they represent a company’s cryptocurrency assets and offer an overview of the money associated with it.
3. Integrate cryptography into its accounting practices
The challenge is to be able to categorize and “reconcile” cryptographic, DeFi and blockchain transactions and synchronize them in your own accounting system or ERP. Illustration: If a company wants to increase its cash flow by investing in DeFi, it must be able to follow its cryptocurrency flow through DeFi “exchanges”, custodians and protocols and merge this information with its currency accounting system. , Dollar …). This also applies to companies that charge in cryptocurrencies and / or have cryptocurrencies on their balance sheet such as Tesla.
4. Be at the forefront of regulations
In terms of innovation, the fiscal and legal framework is still lagging behind. Web3 is no exception to the rule. New types of digital assets are evolving every day and are being used in ways that do not perfectly fit into existing tax and regulatory frameworks. Such a craze that, in its Blockchain & crypto 2022 study, PWC states a percentage of 30% of companies with cryptocurrency assets. Accounting firms must therefore keep abreast of the latest legal developments to understand the risks and regulations that can affect their clientele.