Even if blockchain's potential to revolutionise the way we do business is over-hyped, the profession needs to take notice of this new technology, says Ramona Dzinkowski
This article was first published in the October 2017 international edition of Accounting and Business magazine.
According to an EY report, Blockchain: How this technology could impact the CFO, ‘advanced financial applications are in development now, and global systems that could revolutionise traditional finance operations will be implemented in the coming year’.
But surely this is old news for any senior finance executive? Well, not really. While most of us have heard some hype around blockchain, the concept in my mind is still quite esoteric and ethereal.
Let’s remind ourselves what blockchain is. By consensus, it can be defined as a global digital ledger of economic transactions that is transparent, continually updated by countless users and almost entirely secure from cyber attacks.
According to the latest survey on the subject by Deloitte, nearly 40% of senior executives polled had little or no knowledge of blockchain. While some of its proponents see the technology as democratising markets, and revolutionising the monetary system as we know it, others are not convinced. For example, of the 60% of executives in the Deloitte study who claimed some knowledge of the technology, one third considered it over-hyped.
So why are accountants sceptical and what do the leaders of the profession have to say about the potential impact of blockchain?
Not surprisingly, ACCA was among the first of the professional bodies to connect the dots. First, it says, industries that involve a large amount of manual processing, have ‘legacy’ systems or rely heavily on outdated and/or offline modes of working could benefit. For example, for importers/exporters, the ledger would contain the contract, letter of credit, shipping receipt, and regulatory documentation for customs and insurance. Multiple parties, such as the importer, exporter, their banks, shipping company, regulatory bodies, shipping/port authorities, etc, would be able to access the ledger.
For management, the distributed ledger removes disjointed internal and external databases of records that need reconciling, and should reduce the risk of missing transactions through timing mismatches or booking errors. For the accountant, distributed ledgers could help transaction-level data to be compiled, checked or reconciled.
As to why accountants might be sceptical, perhaps it’s due to its association with Bitcoin. In 2014, Charlie Shrem, the founder of BitInstant, was sentenced to two years’ jail time after he admitted to aiding and abetting an unlicensed money transmitting business.
But bad blood aside, ACCA believes ‘Blockchain presents new areas for analysis and consideration, and the sooner professional accountants increase their awareness, the better prepared they will be to engage with it.’
Ramona Dzinkowski is a Canadian economist and editor-in-chief of the Sustainable Accounting Review
"While most of us have heard some hype around blockchain, the concept in my mind is still quite esoteric and ethereal"