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Cryptocurrency, accounting, and automation technology

Accounting is the latest professional field to find the need to cope with the changes brought on by automation. Whether you think these changes are good or bad is largely personal, but robotic process automation (RPA) systems are still slowly taking over accounting and finance departments around the country.

One of the promises of automation technology is the ability to handle high-volume, standardized tasks that would otherwise take up a disproportionate amount of human work hours. Automation also promises to link the tasks to data analytics for advanced accounting. Both of these can be real benefits for both individual accountants and large accountancy firms.

Technology like RPAs are also of benefit to professionals whose client bases’ increasingly include cryptocurrency investors and traders. The complexity of tracking cryptocurrency strains traditional bookkeeping techniques, but as the IRS closes in on traders, their need for professional accounting services is greater than ever. Automation promises to make handling crypto clients’ accounts more manageable, but will the technology replace the role of the accountant entirely?

Why Cryptocurrency Accounting Needs Automation

As cryptocurrencies and the associated blockchain technology become a common part of accounting practice, accountants and firms need additional tools to keep up with the complex workload presented by the complexity of virtual currencies.

You can track fiat transactions in a spreadsheet or your current preferred accounting software. If you’re adept enough at handling cryptocurrency, you can even track one currency in a spreadsheet. However, once you start working with two or more currencies, there’s no way to track everything accurately in a spreadsheet. Moreover, the IRS considers cryptocurrency to be property — not currency.

These are just the beginnings of the complications that come with cryptocurrency transactions. For example, the IRS requires you to generate capital gains or losses based on the adjusted cost base. Tracking the cost basis and the adjusted cost base is laborious at best thanks to the extreme volatility that cryptocurrencies can experience within 24 hours. Then, you’ll need to keep up with the different prices offered on both difference exchanges and in different national markets.

Using automated technologies can ensure that accountants not only work accurately but can work at scale, particularly as you watch transactions reach significantly higher volumes. Automation is almost required just to calculate basic tax information much less help your clients make smarter investment decisions.

AI Could Replace Accountants but Not for Big Investors

Given the rapid adoption rate of new technologies among the cryptocurrency community, you can expect a certain group of DIY investors and tech enthusiasts to immediately gravitate towards those programs; they are ideal for eliminating repetitive tasks such as accounts payable processing. In other words, they’ll eliminate human accountants from the conversation, but only for a certain faction of cryptocurrency investors. And this isn’t necessarily a bad thing: challenging accounting principles will eat into your time and profits.

However, not everyone will choose to follow the road to AI automation. Experts believe that wealthy investors and enterprise clients will, at a minimum, want a human involved in their bookkeeping if not leading the way, particularly because everything is a taxable event. With so many events able to trigger an audit, many customers will pay the extra fees to avoid the microscope.

So while you may experience a spate of clients with crypto holdings and then watch that number drop off the cliff, you still want to both learn the principles of the automation software and of manually calculating cryptocurrency if you want to keep high-value, enterprise clients.

Accountants Benefit from Getting to Know Cryptocurrency Platforms

In the meantime, it’s worthwhile to continue getting to know the existing platforms. Today’s account management platforms are providing the first-line response to the problems posed both by cryptocurrency generally and by the IRS treatment of it.

Today, there are several platforms available that track, organize, and manage assets using a single dashboard. These are built both for individual and professional investors, and they can be helpful tools both in terms of your practice and in unifying your clients’ figures so that you can tackle their taxes easily. Some of the tax-specific platforms include:

  • Beartax
  • Bittax
  • Blox
  • Cointracker
  • Koinly
  • Tokentax
  • Zenledger

The majority of the current software aims to lower tax liabilities by identifying crypto losses (capital loss deductions). The popularity of tools exists for a reason: a survey found that taxpayers reported an abundance of short-term capital losses (a jump of 521% year-on-year). However, the software is not always accurate, and so it benefits from a steady hand and human knowledge of tax law. In other words, treat these tools as a springboard but not as the final word on a client’s return.

Expect Big Changes in the Near Future

Ten years on, the world of cryptocurrency is still in its infancy, but it’s ushering in some of the biggest changes in accounting in a hundred years, particularly in automation.

As accountants continue to grapple with the challenges presented by cryptocurrency, they’re also becoming crucial advisors to investors, enterprises, and SMBs. You can expect advice and technology to change again several times — perhaps even in the near future. But it’s still worth getting to know the existing platforms and rules to keep ahead of the curve.