At a glance
- Web3, which enables decentralised financial transactions, is already here and the volume of transactions as well as clients using the Bitcoin network is fast gaining speed.
- Accountants need a foundational knowledge of Bitcoin principles, decentralised finance (Defi) and Web3 to be able to attract and guide clients on marketplace choices, tax obligations and risk including innovative new ways of capital allocation.
- Web3 will enable accountants to leverage new business models with smart contracts that allow greater automation and reduce intermediary costs.
Web3, a new, decentralised iteration of the internet built on blockchain technology that enables peer-to-peer transactions on open and permissionless networks, will be as disruptive to the marketplace as Web2, predicts IPA Fellow Electra Frost.
“All accountants will use cryptocurrency and all accountants will be crypto accountants,” says Frost, whose practice consults with accounting firms on Bitcoin, crypto and digital asset business strategy as well as training other accountants to support Bitcoin adoption and Web3 innovation.
She is urging public practitioners to upskill in this fast-moving field to collaborate in decentralised organisations and leverage new technology that will empower their businesses to compete with larger firms and government agencies in an AI-driven economy.
Web3 will radically alter the way we do business, she says, with clients wanting accountants who can advise on marketplace choices, tax obligations and risks.
“The problem is that many accounting professionals don’t understand the Web3 space because they haven’t studied Bitcoin, which is more than a digital payment system for use peer to peer, first,” says Frost. Doing so will empower accountants to leverage Defi applications within Web3 and guide clients around trust assumptions and best practice, she says.
Experts note that accountants who wish to practice in the Defi space also need to familiarise themselves with crypto subledger software to allow the aggregation of on-chain data, appropriate cost basis tracking for tax treatments, and integration with accounting software. Such tools used by crypto accountants include Bitwave, Cryptio, Cryptoworth, Tres, Finance and Elven.
Innovative new paths for accounting
Leading cryptocurrency accountant Greg Valles, Treasurer of Blockchain Australia, says: “While it’s true that many accountants are using a cryptocurrency tax calculator product to help clients in this space, most don’t understand the many complexities, from cost base and non-fungible tokens (NFTs) to capital gains, that are involved in transactions.”
The growing use of tokenisation opens avenues for accountants to explore new ways to value assets, allocate capital or, indeed, undertake financial reporting.
In Web3, accountants can also provide an unbiased and transparent view of financial operations with decentralised audits.
Frost says other advantages of Web3 for clients include owning their own data and identity and having control over it. ‘Smart’ contracts transfer money, rights, and property between parties, reducing the need for intermediaries. Digital assets are stored in exchanges or held non-custodially, using hardware or software wallets for private keys.
Accountants leverage Web3 with Auditchain and Pacioli AI, to ensure accuracy and compliance through real-time validations and decentralised assurance of financial data.
“The Bitcoin network is also the most decentralised, permissionless and secure network that ever existed,” says Frost.
Cyber security expert Tyler Wise agrees: “Blockchain is a series of verified equations and algorithms for transactions that can’t be changed and can’t be taken away.
“You could keep your entire ledger/chain on your computer and if it were lost or stolen, the chain would continue to exist, and you would not have lost any of the cryptocurrency that was there.
“You still need to practice good cyber hygiene – strong password and multi authentication – but transactions on Web3 are quite secure.”
| Web 1.0 The earliest stage of the internet featured a small number of content creators sharing static web pages for a wide audience of passive readers. It was focused on information retrieval, where users primarily searched for and consumed data. |
| Web 2.0 Web 2.0 saw the rise of interactive, user-generated content. Instead of just consuming information, users now create and share vast amounts of content. This era brought forth social media, collaboration tools, and online communities. Enhanced interactivity, ease of use, and compatibility across devices became key. |
| Web 3.0 Web 3.0 is centred on decentralization, openness, and increased user empowerment. This phase shifts away from centralised platforms like Facebook and Google, favouring decentralised networks. It emphasises privacy, where users can engage without intermediaries, reducing risks. With technologies like blockchain, artificial intelligence, and machine learning, Web 3.0 drives innovations in decentralised finance, enabling peer-to-peer transactions, smart contracts, and the use of cryptocurrencies for secure financial exchanges. |
The importance of staying relevant
According to McKinsey, the financial industry is already at the forefront of emerging Web3 technologies with, at one stage, the daily volume of transactions exceeding US$10 billion.
Since working in the cryptocurrency space, from 2015, Valles Accountants have overseen transactions of more than $1 billion, mainly for crypto-dependent businesses.
“But, as the population increases and more people become familiar with this type of investment and currency, the more transactions we will see,” says Valles. “And, when superannuation gets involved, there’s going to be an even greater demand for accountants who are familiar with this financial system and a very steep learning curve.
“The way AI and blockchain is moving, accountants who don’t start to upskill will be left behind.”
Valles says he educated himself on this new iteration of the internet, setting out to learn everything he could about Web3 and how blockchain technology could empower him as a public practitioner. He suggests lessons could range from YouTube sessions and blockchain seminars to formal Blockchain education.
“Businesses do what they do very well,” says Valles. “Our job is to look at the governance around how businesses can work on blockchain and what is the most boutique and relevant cryptocurrency. We also need to understand tax law and how it applies to their situation.”
Web3 innovator Frost has been putting Bitcoin on the Balance Sheet since 2013, studied applied blockchain, and is now developing an education framework for accountants.
She is also spearheading a foundation whose mission is to share knowledge and provide consensus-driven proof-of-competence (PoC) for accounting professionals in the new digital economy.
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