The new kid on the block (chain) is the crypto currency. Bitcoin is but one example of these new digital virtual currencies which may at some future date be the future of how we do business.
The issue for me is one of hurdles and acceptance before we dispense of ‘fiat money’ and whilst Blockchains have been heralded as the new democracy and able to restore trust in our financial system, there is still some way to go before we assess the true value of these crypto currencies.
It does not help as well as speculators have entered the fray and ridden the bitcoin bandwagon, not just to use it as a medium of exchange but as a way in itself on speculating about the true worth of a bitcoin. The value has been truly spectacular over the last twelve months and apart from the occasional blip and puncture, the bubble seems to be expanding.
There are some of reasons why we haven’t seen mainstream acceptance just yet
Consumers haven’t got their heads round it as a payment transaction method as they seem too comfortable with cards and mobile payment technology and most high street stores deal in old fashioned local currencies which people can relate to in terms of worth set against wages that are paid traditionally. Crypto currencies have only recently gained traction in investment.
Blockchains, which are a natural companion to digital currencies have also not gained widespread acceptance due to lack of infrastructure and obscure trading platforms and it doesn’t help that crypto currencies don’t have all the same attributes.
We also don’t feel safe because of the lack of regulation and governments themselves potentially feel threatened because it would mean no longer being able to control the money supply.
Then we also have project specific initial coin offerings which only have value for the reason they are raised. If the project fails or is not scalable, these ICOs have a very limited market and again the reputation of the sponsors, underwriters and regulations doesn’t sit comfortably with more traditional IPOs .
One of the main alleged advantages to Bitcoins and Blockchains is that the identity of the customer is known, this again is not always correct and many governments are wary of the potential for money laundering and fraud.
The advantages of these digital currencies are easy to spot, less transmission costs and quicker settlements as well as being more secure. However, it is fair to say this is an emerging technology (and market) and the pace of change and innovation is quite startling. We are already looking at improvements such as Ethereum and Smart contracts as well as quantum computing that will speed up processes exponentially.
As far as Accounting is concerned we have seen specialist courses around this new digital landscape and Fintech coming into popular mainstream teaching.
Philosophically it will be a return to some traditional ideas in Accountancy because of the fundamental questions this new technology brings- namely what is money and what is a contract? These ideas usually form the basic building blocks of Accountancy but I would suggest that the new digital currency ideas and attributes should perhaps be discussed at a very philosophical level so that Accountants can understand what is trying to be achieved.
The digital revolution is already upon us and the speed of innovation around Fintech is catching us all out. The Accountant that at least acknowledges these new technologies will have a basis for further conversations as the future of digital currencies become clearer and would gain a knowledgeable advantage over his business colleagues.
I also happen to think that Accountants that market themselves as a thought teacher around crypto currencies whether it is through a technical course or not will be the one that can add value to the future of organisations.