Accounting technologists Randy Johnston and Brian Tankersley, CPA, recap the 2025 AICPA Blockchain Symposium, highlighting developments in cryptocurrency regulation, stablecoins, decentralized finance (DeFi), and digital asset taxation. They discuss how institutional investors are shaping the crypto landscape, the slow progress on IRS crypto guidance, and emerging CPA audit and assurance standards for blockchain. The Accounting Tech Lab is an ongoing series that explores the intersection of public accounting and technology.
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Transcript (Note: There may be typos due to automated transcription errors.)
SPEAKERS: Randy Johnston, Brian F. Tankersley, CPA.CITP, CGMA.
Brian F. Tankersley, CPA.CITP, CGMA 00:00
Welcome to the accounting Technology Lab. Brought to you by CPA practice advisor. With your host, Randy Johnston and Brian Tankersley,
Randy Johnston 00:08
Welcome to the accounting Technology Lab. I’m your host. Randy Johnston, with co host Brian Tankersley and Brian and I got to have a wonderful experience together. This week. We were invited to the 2025 AICPA blockchain summit, the eighth version of it. And it turns out Brian was doing his job, and has a picture of us in front of the AICPA offices together as we were headed into the meeting. And once we got in our hosts, which was Ron karate of the Wall Street blockchain Alliance, and Eric askerson and Sue Coffey, oh my, it was a fine deal. But we were fortunate enough to be seated at the inner circle in the conference room at the AICPA. Now, there were lots of interesting people in attendance. We’ve got the entire list of everybody was there, but there were representatives from major regulators around the blockchain and cryptocurrency world, and a lot of people from well known firms that have cryptocurrency practices, which I think is fascinating as well. So what we’re going to try to do with this episode is take you inside this group of very fine attendees and give you a little sense of what was covered in our time together there. So you know, we’re going to start off with that first panel, which included a lot of different attendees, David Brill and Joshua, claiming Josh as she went by and so forth. And what we’d like to do is just start with a bit of this background, which, for lack of a better name, was referred to as a fireside chat. So we’re going to take you through the various sections, so you get a sense of what was going on in the room here. So Brian, that’s a long setup for today. But what do you think is important for our listeners to know from the first section, the Fireside Chat section? Okay,
Brian F. Tankersley, CPA.CITP, CGMA 02:31
so the, you know, it’s kind of a congratulations. I’m sorry, okay? And the reason I say that is that you know, the bad, the good news, I guess, is that the Trump administration is much more amenable to crypto. And in fact, during, you know, and now, in fairness, the Obama administration was amenable to crypto toward the end of their time and the you know, but the Biden administration was very anti crypto, okay, to the extent that the Biden SEC almost regulated a lot of the crypto out of business, or at least regulated the money of crypto. Now, as we look at this, though, because we’ve had such a regulatory change the you know, the good news is Trump’s called the dogs off from a regulatory perspective, okay, the bad news is we don’t have a regulation, regulatory structure in place on how to do markets and how to have guardrails, and, again, how to work with this and make this trustable. And still, you know, still be in a position to where we can have these assets and not worry about every time you throw more than $10,000 in it and don’t file a FinCEN form going to jail for money laundering. Okay? So the good news is the the regulators aren’t out looking for things to destroy, okay? The bad news is that we still don’t have a whole lot of structure here, and any improvements that happen are going to be illusory in the event, you know, the next president, whenever that is so, I guess it’ll be 2027 the next president comes in. If they’re profoundly anti crypto, they could reverse a lot of the stuff. Now the good news for you is that there’s four the market cap, according, as I looked at it today, on coin market cap for all the crypto in the market right now, today, and I’m focusing right now just on crypto, not as much on the other uses of blockchain, which are also very important. But the market value of cryptocurrencies right now outstanding is $4.12 trillion as we record this on October the ninth at 5:24pm Okay, and that’s according to Coinbase, okay. And so if you read it on the internet, it must be true, right? But the the point I’m trying to make here is there’s too much value tied up. In there for crypto to completely go away at this point. You know, now, Ron kuranta mentioned a few times that he wished we could have regulatory frameworks like they do, I think, in Singapore and couple of other countries. But you know, again, there’s still a lot of problems. I mean, we still had FTX, and FTX really occurred because somebody was holding assets on behalf of somebody else, and they got out of trust. That is, they reported assets that didn’t exist to their to the people that they were fiduciaries to. But since they did that in a tax haven and a place with no regular regulation on it. Nobody caught him. Okay, so, so we’ve got this difficult problem is we don’t want to go the whole way to sec and strict liability and all of the things that come under put regulating this under the 33 and the 34 act. But on the other hand, you know, and we don’t want to do necessarily, do know your customer, but we got to find a happy medium in here so that somebody’s somebody is, there’s some level of regulation with this, and Congress is going to have to actually make a decision. And with the current makeup of the Congress, as close as it is in the house, and the close margin in the Senate, you know, no is the only answer that everybody seems to be giving to anybody of the opposite party, which means nothing happens well.
Randy Johnston 06:34
And for those of you who are seeing the visual version of the podcast, we’ve got the word clarity in there, and the clarity Act was raised multiple times. Now, of course, the clarity Act has passed the House, and it’s sitting in the Senate Banking Committee, and there’s a discussion bill called the responsible Financial Innovation Act, which you know, hopefully will come out of the Congress to give this clarity. But so much of what’s being done in the US now is moving very fast. A couple of learnings for me from the event that also came up as the day progressed, but possibly in this context, is the right time to cover it is fraud, and there’s about 20% of the crypto and stable coins that are fraudulent, but 80% are valid. So we got to have a way to weed this out, as Brian was alluding, to separate the sheep from the goats Exactly. And it turns out another one that was an aha moment for me. Brian and I have been doing crypto and blockchain since inception, back in 2010 so for 15 years, but I had always pictured crypto far more on the individual side and a lot less on the institutional side, and when the discussions were going around, as we’ll get to in a future section In this podcast, the treating the institutional investors differently than the individual investors was like a Oh my. And there was statistics like 28% of US citizens holding cryptocurrency, which was also another one of those penetration numbers that was pretty bloody interesting. But, you know, this whole thing
Brian F. Tankersley, CPA.CITP, CGMA 08:24
with the market pretty interesting that, because I looked it up, the US bit strategic Bitcoin reserve right now is at 198,000 Bitcoins, which is just under 1% of all outstanding Bitcoins. So the government owns 1% of this stuff, and they’ve only obtained it through seizure and forfeitures.
Randy Johnston 08:50
So yeah, and that is pretty interesting. And by the way, just so you’ve got a number on 28% of American that’s 65 million people holding crypto, which was a stunningly large number to me. Now, I would suggest, then, if you go ahead into the next section, Brian, that it probably makes sense for us to talk a bit about the AICPA update. Now, this was done by Amy beers and Melanie laredson and the ladies did a wonderful job of just laying out where things were at from both a tax and an audit perspective, and what was being attempted by the AICPA in providing guidance. And one of the things that we recommend for you is that you begin your learning on how to handle a lot of the regulatory issues related to digital assets. And there was a pretty extensive discussion on the 1099 da and handling that more like a cash 1099 more like a 1099 Uh, interest and so forth during this portion. So Brian, I know you were listening intently in this section, but what other guidance would you say you learned from Amy and Melanie?
Brian F. Tankersley, CPA.CITP, CGMA 10:20
There is a digital assets working group that is out here that is focusing on the ANA questions, and they’re dealing with issues like when somebody mines crypto and gets commissions, or not commissions, but transaction fees, or, again, newly minted Bitcoins are minted and they get those. How do we account for those? Which is a pretty interesting question. How do we how do we handle the crypto lending and borrowing? How you know what constitutes sufficient, competent evidential matter for the attestation and the assurance engagements that CPA is do over stable stable coin reporting and control. What are the criteria for this, which they’ve actually come out with, they’ve come out with those. What are the evolving stable coin laws and regulations? Unfortunately, Melanie told us that the tax stuff is not progressing well at all. Okay? And that’s kind of not surprising, if, when you consider that, when President Trump took office, there were 100 102,000, people that worked for the Internal Revenue Service, okay, there were 76,000 a couple of weeks ago. And when the government shut down on October 1, we went down to about 36,000 Okay, so we’re literally looking at the that couldn’t get stuff done with 100,000 people. Now, trying to figure out how to do stuff with 36,000 people. And I’m sure that the experienced folks have stepped out. But, you know, a lot of experienced folks have stepped out. Now, the good news is it appears that the service is, you know, according to Melanie, every time they’ve had interactions with them, they seem to, you know, the people they talk to seem to be up on all the major topics and issues and things like that, but they’ve just not taken any positions. And so the challenge there is that the only thing you know we’re seeing some people getting private letter ruins, but again, nobody else can rely on that PLO. And so, because it’s not considered, you know, it’s only binding on that service in that one situation. And so it’s a there’s some significant challenge in it.
Randy Johnston 12:35
And it turns out there was another discussion on ethics, particularly around independence and how the ANA groups and peer reviewers were looking at it, and that part of it was also pretty fascinating. But the bottom line is, I think the audit side of the world has actually progressed pretty well, and as you just heard Brian allude to tax, not so good, but there’s efforts being made in that area, and that’s good. So then we moved on into legislative and regulatory types of issues, and here we had Katie highly and Jason Gottlieb speak to us on this and again, pretty well clued up. So Brian, what would you call out on the legislative and regulatory update?
Brian F. Tankersley, CPA.CITP, CGMA 13:27
Well, crypto, the crypto people, everybody there agreed that crypto, stepping up their legislative involvement was critical in order to get some of the regulatory things through. You know, if you look at, if you look at the people who were the most anti crypto in Congress and in the Senate, historically, they were people that regulated traditional financial service businesses. Okay, so, you know, again, people that were on the Senate Banking Committee or the house, you know, the house related committees in the House, and so the lobbying was effective. The SEC kind of get got off on the wrong foot with litigation. The good news is, you know, they were actually trying, at one point to end XRP, the coin, formerly known as ripple. And then, believe there’s another one as well, where they’re suing them to get them make them disgorge all the assets that they took through their initial coin offering, where they set up these things. And the good news is, in the early days of the Trump administration, that was one of the first things the SEC undid, was getting rid of a lot of that prosecution well.
Randy Johnston 14:40
And to that point, Brian, you know, on the XRP, in prior podcast, we’ve talked to you about how we believe that some of these cryptos could be replacements for the swift technologies and the ACH technologies. And you know, I thought that we would be further along. On some of this transactional piece, but it was also clear that the interchanges, the exchanges, if you will, that’s not very well worked out. And you know, the experts were guessing, a multi year workout on some of those points. But, you know, another one that surfaced for me in this section was the privacy transparency piece, because I had just not considered if you made a crypto transaction, and they actually took some what I call personal things, for example. And this feels a little odd to call out on the podcast, but if you were going to go from Texas to New York and pay for an abortion with crypto that you know, would that, in fact, be surfaced? And how do you protect the privacy on a transaction, regardless of what your ethics or belief in those areas, those types of transactions, do they have privacy or transparency? Do you see that on the blockchain or not? Does that get reported back to Texas so you can be thrown in jail, you know, who knows? But I had not actually considered the situations where privacy really has reason and purpose. And originally, when we were talking about cryptocurrencies, Brian, you recall, we talked about, you know, how they were anonymous, but you could see the transactions, and now it is so easy to associate a transaction with an individual, the privacy is now exposed far more than we perceive.
Brian F. Tankersley, CPA.CITP, CGMA 16:32
And I’ll just say as a side note, there was an article, I think, in the Atlantic earlier this year about somebody who had a lot of crypto that had said something about it publicly, that was abducted and tortured for two weeks to make them give up the crypto key, the keys, the private keys, needed to transact that crypto and to spin that crypto. Now this is the thing that, again, you’ve got to know about crypto, is there is no undo. Okay, once you submit a transaction and it goes through that engine, there is no court order, there’s no process, there’s no way to get that transaction reversed for any reason. So for example, if you send $50 million to an to a public key, the account number, basically for a for an account holder that doesn’t exist, it’s just goes off into our land. And so you’ve effectively just thrown that out the window into the world. Yeah,
Randy Johnston 17:31
and so in this section, also, the position of the institutional investors was really surfacing here, and it was part of my evolution, my thinking. Because, as you just pointed out, Brian with the XRP, you know, kind of trying to be undone. The institutional investors, I think, wanted that, and it’s probably because, I don’t know this fact they had a large position, and didn’t want to lose their rather large position in this so one of the other things that, not unlike the markets, most of us can’t really benefit from the markets the way an institutional investor can. And of course, as we would say in my part of the country, I’m again inside insider trading, but we know that it goes on. And in effect, some of this stuff that’s going on with crypto is institutional players putting their thumb on the scale of the way they want the scale to tip.
Brian F. Tankersley, CPA.CITP, CGMA 18:32
Well, we’ve seen over the years, we’ve seen a lot of technologies that were supposed to revolutionize computing and other things where they’ve been embraced, and basically were embraced and choked to death. And you know, they lost their way. You know, you think about what happened with Sun Micro systems and Java, and how that was kind of taken over by somebody else. Or you think about, you go back and think about browsers where you had the Netscape browser and the, you know, the Mosaic browser, and then those got crushed by Internet Explorer when that was put in into there. And so we’re seeing and expecting the traditional folks to come in with their own stable coins and their own products that then they can use for transactions. And so just like, you know, when you buy a when you get a 401, K, or you get an IRA, you know, the IRA from Fidelity, or somebody like that, Fidelity has their own funds. And when you go to the mass mutual people, they have their own funds that also pay commissions to the people that sold them to you. So you should expect that that’s Yeah, and that that’s coming Yeah.
Randy Johnston 19:47
And in fact, this whole idea of stable coins, because, without exaggeration, 1000s of blockchains, we can expect 1000s of stable coins. I thought the JP Morgan presenter talking about JP Morgan. Stable coin was fascinating. But when we look at how all of the exchanges occur, you know, as of today, I think binance coin BNB is really the king of the exchange tokens doing something on the order of 1.2 million transactions per minute, and so just really hard to believe that type of volume. But on the other side of the world, you know, you’ve got the EU mulling sanctions against a ruble backed stable coin, and you got Morgan Stanley, who’s allowing its advisors to recommend a 4% Bitcoin allocation in the portfolios. I mean, these are wild times when it comes to some of those types of issues.
Brian F. Tankersley, CPA.CITP, CGMA 20:49
Yeah. I mean, it’s not been that long ago, less than two years, when there was so much uncertainty surrounding the legality of crypto that a lot of traditional financial services folks just wouldn’t touch it. Yeah,
Randy Johnston 21:03
exactly. So I think that brings us in, then to the next topic, Brian and you know, in this particular case, there we go with the rise of stable coins really became a big deal. And the whole idea of stable coins was really trying to get a securitized market. Might be a way to say that, the way I’ve
Brian F. Tankersley, CPA.CITP, CGMA 21:33
always described them as they’re analogous to money market funds. You know where, when you’re trading, you know, if you think about your portfolio, when you’re trading stocks, you’re expecting the value to go up or down, okay? But on the other hand, when you have a money market fund, you’re trying to have it’s supposed to be worth the units are supposed to be with exactly $1 and you should not expect appreciation beyond the interest that you would get for letting the money market, you know, give you an incremental small amount of risk, so you make 50 bips or or something like that over a year. But with the with stable coins, these are blockchain based cryptocurrencies that are also backed with assets. And that’s where the accountants come in, because we’ve got accounting firms now that are doing at a station engagements to again, over the, you know, over all kinds of things related to these coins to give them credibility so they can be held and that they are, you know, that they’re auditable and and again, the systems are adequate to protect the investors money, yeah.
Randy Johnston 22:40
Yeah. Now this panel was interesting because it was cheered by Amy, but we had multiple CPA who are doing this type of work, Jay showman from RSM, and we had Jeff Trent from PWC and Carlton Green from problem Maury, in addition to a PE representative with Brian Whitehurst of Liberty City ventures. Now, as they were talking about this, there was a couple of analogies, and I think it’s great because you just described the stable coin. But I think the what stable coin description that landed with me is stable coin is like a fully backed casino chip. I thought that was a great way to talk about it, because you go in, you give money, you get chips, you can play with them, and you can redeem the chips. And the idea is that, you know, there’s money to be had back. But the why of stable coins was also interesting, because that was to facilitate trades initially, and then it moved to a different space, with, you know, the long settlement periods in our banking systems, Blockchain, in combination with stable coins, fixes this so you can get same day settlement on transfers of funds and clear the accounts.
Brian F. Tankersley, CPA.CITP, CGMA 24:01
And you think about the problem, that a lot of the cannabis dispensaries have where, you know, especially in the States, where a lot of the a lot of them are taking Bitcoin, as in settlement for the sales of cannabis that they have. You know, it when they have to go pay their employees, they either have to go get a whole bunch of cash from somewhere, from Bitcoin, or they have to go and get they have to take the Bitcoin, buy stable coins and then pay the employees in stable coins, which then they can convert to cash. But the stable coin lets them take this 20% up or down daily change in price that can happen with just about any crypto, and it takes that exchange rate risk out of it.
Randy Johnston 24:50
Yeah, and you know, when it comes to this, then again, we expect 1000s of stable coins because they’ll be built for a particular use. And the businesses building these stable coins are likely to use them more like a moat to protect their stable coins. And I think companies are jumping into this that are not quite as regulated, but we now have a concern with any money laundering, know, your customer sanctions and so forth, because you know, one of the examples given here was South Korea only lets banks do these stable coins. But by the same token as I think we had a side conversation on not at this event, but you know, knowing that there are so many spam farms, if you will, that are doing scam farms in Vietnam and the Philippines and that they are holding a significant portion of the cryptocurrency. So they’re basically stealing from the rich and giving to the poor them, and, you know, converting a lot of that money into stable coins or other cryptocurrency assets. So, and
Brian F. Tankersley, CPA.CITP, CGMA 26:14
crypto is also used in, you know, and that’s how we got all the crypto, by the way, in the strategic crypto reserve is often commonly used in drug transactions as well as the sex trade, okay, but you know, again, cash is used in all those places too. So I don’t want you to I don’t want you to lose faith in it. But some of the cryptocurrencies, especially the altcoins, were designed to cons to with such privacy that it’s almost untraceable to figure out who did what, and that creates all kinds of additional problems. So figuring out where that line is going to be on how transparent you have to be, and how traceable it has to be, and how you need to be able to trace it back to a particular person you know that, know your customer problem is a huge problem, because if you don’t do that, if you don’t know your customer, your money
Randy Johnston 27:07
will Yeah, so you know, this will be interesting to see how this all works out. But there’s a whole lot of stable coins out there, so you know, we’ll see what happens. As the genius Act and the clarity piece are all you know, rolled out a little bit further. So next, we covered another area that was also pretty radically changed, and this was the accounting for Dows and staking and defi. Now, I think the last time that we were around this topic, Brian, you know, defy was like the big topic, but boy, talk about something that’s moved on now in this particular section, you know, it was basically a discussion with Dr Sean Stein Smith. We’ve known him for a while, and a tax strategy guy from coin tractor. I’ll get it out. Sheehan, Chanda, Secura, and you know, there was trying to they were trying to explain what was going on in all these regulated areas. So the difference here of federal versus state came up because only Wyoming right now for daos is popular because of the clarity of the state laws.
Brian F. Tankersley, CPA.CITP, CGMA 28:27
By the way, a Dao is a decentralized autonomous organization, so think of it as a self driving trust. Yeah.
Randy Johnston 28:36
And so thank you for that, because I should have defined that so you are then correct talking about staking, where you know, historically, this came from the proof of stake position, but now we actually have institutional staking, for example, where black
Brian F. Tankersley, CPA.CITP, CGMA 28:53
staking is where you agree to, you agree to do Something for a premium, and then in exchange for that, if something goes wrong, you put up your crypto that may be forfeited in the event there’s some kind of problem or some kind of losses.
Randy Johnston 29:11
And so as an example of this, there’s no institutional staking. A lot of institutional capital. BlackRock, Bitcoin, for example, has grown 100% in the past year, worth about 85 billion right now. But fundamentally, there was, there’s no regulations in this area. The closest we had was the revenue ruling 20, 2314 in this area. And further, it was ruled that staking and mining is not deductible. It’s a rewarding of creative activity. So as this was another one of those tipping points for me, where things were moving from the individuals to the institutions, it became so clear when we were going through this second.
Brian F. Tankersley, CPA.CITP, CGMA 29:59
And, you know, the thing that this reminds me of is this is really almost like we’re putting the internet the all the privacy issues we had that came up with the Internet. And, you know, people spying on us through our computer, sitting in our office. You know, that was unthinkable 30 years or 40 years now, when we look at that, we had to invent new definitions and new a lot of new things to deal with, the new challenges and new transactions. And we had to reinvent Nexus. For example. You know, look at, look at the Wayfair decision, the way for South Dakota V Wayfair that made economic Nexus possible. So things like Nexus and other things are going to have to be redefined to accommodate this new activity that’s out here, and we may not get to certainty on all of it in the short term.
Randy Johnston 30:56
Yeah, so you know, there’s two key topics I’d like to make sure we talk about here yet. Brian, the defi challenges. Can you speak to those for a minute?
Brian F. Tankersley, CPA.CITP, CGMA 31:07
Defi is decentralized finance. Okay? And some of the big challenges here include, how do you identify who your counterparties are? So again, another way of saying that is, how do you make sure that you’re not violating sanctions against the Russian government or the North Korean government. Trend when you’re doing transactions in crypto with people that you’ve never heard of, okay, how do you classify income and expenses? Okay, you know, again, if it’s a, you know, that gets a little more difficult. How do we think, you know, what’s, how do we do impairment testing on some of these thinly traded coins. You know, if you go out to coin market cap, it tracks 1000, literally 1000s of crypto currencies. And you know, the bitcoin is more than 50% of the total market cap of in those 5000 so as you’re looking at this now, there’s really super big, and then there’s super little, and those thinly traded things are very much going to be like the penny stocks, where they’re subject to pump and dump schemes and things like that. We have the what’s the reporting look like? You know, again, if you have these computers doing peer to peer transactions, who do you go subpoena when somebody hasn’t done the right 1090, nines or whatever, you know, especially where we don’t have a head office for Bitcoin or Ethereum or anything you know, how do we express assurance on the fact that somebody has a has an encryption key that they could use to spend crypto without making them spin the crypto. And how do we comply with laws and regs, especially in this world, where the states seem to be just pouring gas on the problem by by creating new and more new, interesting regulations surrounding crypto that have to be followed.
Randy Johnston 33:01
So now I’m going to turn it a slightly different area because of new and interesting regulations. The 1099 da the digital asset 1090 nines. These are going to get real squirrely folks, and I may not say everything right here, but go with me and make sure you get continuing education for clarity. But in 2025 the 1099 das are going to report tax proceeds only and are highly likely to be incomplete and inaccurate
Brian F. Tankersley, CPA.CITP, CGMA 33:34
and and the likelihood that they’re going to even try to get basis right is zero.
Randy Johnston 33:42
And so in 2026 the organizations are supposed to report proceeds and cost basis. But there’s a whole bunch of stuff that’s not captured, and that’s why this is going to get really messy. Things not captured, for example, include staking rewards, wrapping and unwrapping of transactions, any lending the liquidity pool, additions and removals, the exclusion of certain stable coin trades under $10,000 you know, I’m looking at these type of limitations. Saying, oh my, you could sure game the system there a lot.
Brian F. Tankersley, CPA.CITP, CGMA 34:22
And I will say this, I think it’s really unfortunate that they’ve set the scopes as low as they have. And FinCEN insists on sticking with 60, with $10,000 the interesting thing about that is that when FinCEN was established, what was it 1970 the value that you had to do a you had to do a reporting form was $10,000 we’ve had a little bit of inflation since then,
Randy Johnston 34:48
just a little bit so closing up these last two non fungible tokens was something we also spent a lot of time five and seven years ago on. But CITP. Certain non fungible token sales under 600,000 are also excluded. $600,000 and of course, a lot of the defi sales are also excluded. So you know, it’s going to be a bit of the Wild West in this area if I understood what was being explained. And that’s what we’re trying to convey to you, is we want you to get a grasp on this. That’s why, you know people who are in the thick of the interpretation here, it’s going to be a big deal. But remember what we said earlier in this session about tax? Tax is still not super well defined. And I don’t think we’re going to get great 1090 nines on this.
Brian F. Tankersley, CPA.CITP, CGMA 35:39
And by the way Randy’s Randy talked about tax not being super well defined. Remember, he’s talking about even federal. He’s not. We haven’t even tried to address state tax issues, which are legion
Randy Johnston 35:51
and these issues, it was pretty clear from the presenters that they said that the brokers don’t even have the ability to track this. And that top the number two through number eight are all using a third party trying to get this tracked. So when it comes to tracking tools out there, a whole lot of this is being concentrated in just a very few it sounded like to me, and I’m trying to interpret it, how all of these different blockchains and cryptos and stable coins will actually get reported correctly? I think it’s going to be
Brian F. Tankersley, CPA.CITP, CGMA 36:29
well, messy. I think this is going to be, this is going to remember, I met a gal at one point that had a service called old money that would go through and take you through, you know, if you inherited a bunch of AT and T stock in like 1960 and you needed to figure out what your basis was, she had all the splits and the dividends and everything, and could could back into it, as you know, the valuations as of certain dates. And so you’ve got these services like that that are doing those kinds of things. But again, it’s, you know, it’s going to be hard, you know, it’s going to be hard for anybody to question somebody’s basis on a lot of these things, because you may not know all the inputs that feed into it. Yeah.
Randy Johnston 37:22
So then the next section that we talked about was also fascinating to me, and that was about tokenization. And when it came to the actual tokenization topic, again, we had lots of interesting people in this, Chris Broderson from Eisner, amped, or was in this, Kristin Coppin from JP, Morgan, Chase. She’s the lady I mentioned earlier. We had Joey Ryan, which, of course, we’ve known from his days at gilded, but he’s over at CPA is nowadays, and here we were trying to get to how all of these tokens worked. So Brian, what are some of the key takeaways from the tokenization section?
Brian F. Tankersley, CPA.CITP, CGMA 38:11
Well, what a let’s define first what a token is. A token is really where we have a digital asked, a digital asset, or a bits and bytes that map to something in the real world. So it could be real estate, it could be art, it could be all kinds of things, all right. And so this, you know, again, the the the issue here is that there are a lot of issues in here. There are a lot of folks jumping into this, but, you know, you have to think about things, you know? And so we’ve talked for a while about how block, how real estate, is a great classic example for a blockchain. Okay, except when grandpa dies, what do you do if you can’t find his key that allows you to sell his house? Okay, so it’s a, you know, it’s in here. And we’ve talked a little bit about smart contracts
Randy Johnston 39:04
before you leave that topic. Brian on real estate, yeah, they also used an example of the skyscrapers in Manhattan, and talked about how you could split it up among floors. But then what happened is the penthouses were valued differently than the middle floors than the bottom floors, so you wound up with variable tokens on a building and how other things couldn’t be tokenized, which you’d think could be, for example, jet engines, which have complete 100% serialization in the jet Engine. And when you sell a jet engine that’s used, how do you it got really tough. And the other one that I thought was fascinating was non fungible tokens. A lot of that was done with art, but now they cited that in real art pieces, you couldn’t tokenize them because it was too hard to establish. The real art piece, you know, value. So you could tokenize it. So, you know, as I, as these guys were explaining,
Brian F. Tankersley, CPA.CITP, CGMA 40:07
you’re talking about, when you say real, you’re talking about physical versus virtual, right?
Randy Johnston 40:11
Yeah. So, you know, you, if you’re on the video version, you can see that, you know, Brian’s wife, who is a, you know, an art major, and loves Van Gogh. He’s got a starry night muck up behind him, but the real Starry Night, Van Gogh is so valuable that none of the typical authentication pieces are allowed easily, because things like lasers could damage the actual painting. And so there’s this really mind blowing thing in my mind for tokenization, where I really considered it far more simple than it actually was. And you know, when we start looking at all these tokenizations, one other piece of learning for me on this section of the event was Brian and I have come from the legacy of believing that blockchains would be incorporated into most ERP systems, and that blockchains really enabled smart contracts, and a lot of those were built on the Ethereum blockchain, but repeatedly said, and Now, unfortunately, I believe correctly so that a smart contract is neither smart nor a contract, and in effect, your ability to use a blockchain to have a verifiable transaction is far more limited than we thought it would be, so real estate and fine art and a lot of these Other things are examples of that. And the tokens, frankly, are just not fungible enough, and the contracts don’t represent the real world well enough.
Brian F. Tankersley, CPA.CITP, CGMA 41:49
Yeah, it’s a it’s an interesting world here that we’ve got. Because, again, if you lose control of the block of the blockchain that it’s stored on, or if it gets defeated, if encryption, it gets defeated by quantum computing, or something like that, then you got a serious world of hurt here, because you have all these assets and now you can’t prove who owns them.
Randy Johnston 42:17
So so you know a couple of three other takeaways I had from this section Brian was, you know, what do we do about custody and ownership and how cleansing of data becomes a crucial skill going forward? And then, what type of accounting services do you deliver in a tokenized world, which is kind of what we were talking about, the real estate area. So this area, which, you know, when I first saw it in the agenda, thought it would be pretty straightforward. I realized this is a great case of you don’t know what you don’t know. And you know, as you started off, tokens are not stable coins, okay? And you know, a lot of times I had mentally compartmentalized them there incorrectly, yeah. So I think from there, the next section that was discussed was another one of those learning curves, because we did have a fair number of large firms in the room that really had gone to the effort over the last few years to build a legitimate crypto practice. So you know this panel, which was chaired by Michael surround me, had John delilio from eisnery Emperor, I’ve known John a long time, good guy, and also Jeremy Goss, who is an audit partner from four of us, Mazars. And then you had Bob Graham, who is a shareholder at CBIZ, along with Cynthia Peterson, who really brought the tax cut of this from Cohen and company. Now these four practitioners were all talking about how they had to build their crypto practices. Now we believe that, you know, we’ve got our core tax and audit and for some client accounting services and for others advisory, but we believe there might be as many as 30 specialty areas in various practices and crypto practices are being built by the larger firms. So Brian, what would you want our listeners to know about these practices and what they identified as risks and opportunities and the like?
Brian F. Tankersley, CPA.CITP, CGMA 44:38
Well, there are a lot of unique problems. You know, again, if you if you’re thinking about this now, you know, a lot of times, you know, are there tools even available to help you do the audit work on this? Are you going to build or buy this? You may have third party data that’s missing pieces, and so you might have third party sources. Of market data that are inconsistent and you don’t know how to resolve them. There are publicly available blockchain explorers all over the place, but, you know, again, they’re, you know, they’re difficult here. I mean, there’s just, there’s you also have to, you also don’t want to get too deep into this, because there is a lot of risk associated with this, because there is a lot of fraud that’s taking place in this area. And so you’ve got to get your whole firm’s got to get comfortable with the risk that you’re taking on, and you’ve got and you don’t know what you don’t necessarily know jumping into this. So again, you start with what you know, build around a core skill set. We don’t have regulation around all of this either, so you don’t want to get caught up and somebody saying you should have been a money services business, especially if you’re doing, if you’re doing investment advising and other things like that, or you’re a trustee. So there’s just, there’s a lot of, there’s just a lot of challenges in here.
Randy Johnston 46:01
So thank you for that, and here I’ll go back because Amy beers, who has been involved with the assurance advisory innovations at the AICPA, reminded us that there is a digital assets working group and that they have an accounting for and auditing of digital assets, document that’s 150 pages that have two updates a year. And we’re going to recommend that if you’re interested in this area, as a PCPs member, you can download that, and I’d recommend it. But when this panel was asked about what’s the future like, you know, besides calling out the poor quality of the blockchain explorers, which that was a little bit of surprised me, because I the ones I’ve used, I thought were pretty good, but they claimed they were pretty poor. They claimed that the key on all of this three years out is interoperability. There’s really no going back on blockchain and crypto. In other words, it’s a real deal here to stay. You know, if we go back,
Brian F. Tankersley, CPA.CITP, CGMA 47:09
there’s 4 trillion in value tied up in it, and so disappears. That’s going to be a depression
Randy Johnston 47:15
that would hurt real bad. But interoperability between the blockchains, the stable coins, the tokens, is really key. And I thought that was a good bit of learning. So what we wanted to do was give you an opportunity to,
Brian F. Tankersley, CPA.CITP, CGMA 47:32
oh, let’s talk about the staff. Okay? Because, because with staff, one of the one of the questions that was asked of the panelist was, what should you look for in staff that are interested in this? And one of the things the lady from coding company said specifically was that you shouldn’t force people into this, okay, because this is a this is its own thing, and it’s different from the other practice areas. So again, you’re looking for folks that have the ability to pick apart a client’s business model and and are okay reconciling lots and lots of messy data, and have good Excel skills and good AI skills because so this is a different this is different from the traditional entry level staff that you might have in CAS or in tax or in audit. It’s a much more heavy Excel, much more closer to data science and analytics because of this huge amounts of data that they’re going to have to deal with and get and figure out what’s right.
Randy Johnston 48:33
Well, we were pleased to be invited as guests. I learned something in a big way every time. So Brian, parting thoughts for our listeners, this, for this session,
Brian F. Tankersley, CPA.CITP, CGMA 48:46
well, I’ll just say that. You know, this is one of my favorite meetings every year, and I really have a good time at it every year. I learn something new every time, just like you said, Randy, and it’s, it’s interesting to see, you know, to because I feel like we’re at the beginning of this long journey with crypto. And even though we’re 17 years in, near 17 years post the Satoshi namato paper on Bitcoin, a virtual digital cash. You know, we’re 17 years on, but it still feels like, if we look over our shoulders behind us, we can still just barely see the port we left. But like Columbus, we got a long way ahead of us, and getting home isn’t for sure. So we’ve got, you know that although there is less risk than there was, there’s still risk, and we still have a long way to go toward getting this stuff where it is it can be used in the same ways as cash and traditional security investments. And again, there’s a whole regulatory regime that has to get dreamed up and then. That has to get harmonized globally into something where people can trade globally. So it’s still early days, but it’s exciting times.
Randy Johnston 50:10
Well, as I alluded to, Brian and I were so happy to be invited as guests again, to listen to all these really smart people dealing with crypto and blockchain, discuss what they have seen and are experiencing in the market. And what we wanted to do with this session was to give you a little insights. Now we’ve recorded it three days after the actual event. Brian wanted to record it the day of, so we’d actually have an on the spot reaction. But he said, Look, we can’t wait very long to record it, because there’ll be so many pieces that will drop. But what we’ve tried to do in this session is summarize a long day. I mean, it was, it started at 830 and finished at 630 I mean, we’re talking a long day of content, and I don’t regret that at all. I would do it again in a heartbeat. So we appreciate you listening in on today’s accounting Technology Lab, and hopefully you learned one or two items about blockchain and cryptocurrency that you can leverage. All the best to you. Good day.
Brian F. Tankersley, CPA.CITP, CGMA 51:21 Thank you for sharing your time with us. We’ll be back next Saturday with a new episode of the technology lab from CPA practice advisor.
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