What was your journey into cryptocurrency like? What initially caught your attention and why?
The decision for BPM LLP to be an early pioneer in the blockchain and digital assets space was rather simple. We saw the opportunities in blockchain technology that can change how we do things today, how companies operate, and how transactions are processed. As such, BPM LLP wanted to be part of “new movement” – the next Internet 2.0 as some might call it. We visualized that with the rapid rise of the distributed ledger technology, brings disruptions and transformation to businesses. We believed the blockchain technology, which enables cryptocurrencies (digital assets) like Bitcoin and Ethereum, will take us into a new frontier of openness, decentralization and globalization. Additionally, as cryptocurrencies are becoming more mainstream, the need to understand blockchain and to own cryptocurrencies will become a household name.
What really caught my attention, however, were the people. The caliber of the management teams in this space is exceptional, both in terms of intelligence and integrity. There are some bad actors too, of course, but the community works hard to self-regulate and keep them at bay. I’m not sure who will be the next Elon Musk or Jeff Bezos, but I can assure you he or she works in crypto and is, or will be, a client of Blockchain Tax Partners.
When did your firm begin offering crypto accounting as a service? What specific services do you offer to crypto clients?
Acknowledging that the blockchain/digital assets industry was an underserved and untapped market, in early 2014, BPM jumped into this space and began serving blockchain/digital assets companies. Since then, BPM extensive experience serving various blockchain and cryptocurrency companies within the cryptocurrency eco-system, including miners, wallets, custodians, exchanges, brokerage, stablecoin, and services, as well as the crypto hedge funds, PE funds and VC funds and other blockchain/digital assets operating companies. We take a multi-service offerings approach in serving our clients in the form of audit, tax, information technology, regulatory and compliance, CFO/accounting services, and other attestation services.
What are the top three mistakes you see crypto clients make when it comes to accounting?
There are many issues and matters that we see being involved in this blockchain/digital assets industry, and honestly, that’s the fun part of it – the ability to help our clients while making an impact on the industry. The three most common pitfalls are (1) lack of transaction data and information, (2) tracking of cost basis of digital assets, and (3) treatment of like-kind exchanges.
What are the top three challenges when it comes to accounting for crypto?
Again, the fun part of what BPM has done is the ability to help our clients. In many aspects, the fun part are the challenges we experience every day. The top three challenges are (1) lack of accounting and audit guidance, (2) verifying the existence and rights of the digital assets, and (3) dealing with privacy coins or tokens.
What's the future of crypto accounting?
We speculate that there will be a new and separate set of standards and rules for this new asset class. The current standards and rules do not cover this new asset class nor trying to fit this new asset class into the current standards and rules do not make sense either. It is possible that the new standards and rules will focus on the intent, business purpose and ability of companies engaging in digital asset activities.