Cryptocurrencies are hot. For the moment, at least. Whether or not they’re here to stay or are just an over-hyped bubble remains to be seen. But from an accounting point of view, that question is largely irrelevant.
If your clients are big on cryptocurrencies, or they just acquired some Bitcoin for fun, you have to advise them on how to proceed with their bookkeeping, crypto payments, and asset management. That task and responsibility rests with accountants, for however long cryptocurrencies remain in style.
Types of Cryptocurrencies
While Bitcoin is the best known cryptocurrency (and the most valuable today), it’s far from being the only one. In fact, Litecoin, Ethereum, or Bitcoin Cash are only a few examples of the 2,239 types of cryptocurrencies available today.
Litecoin, Ethereum, or Bitcoin Cash are only a few examples of the 2,239 types of cryptocurrencies available today.
Beware, though: the market is constantly evolving. New cryptocurrencies are born (and some die) every day. Check Investing.com for an updated list on any given day.
What Can Your Clients Do with Cryptocurrencies
There are several typical ways your clients can use their cryptocurrencies. Bitcoins & Co. are great for transferring value. Your clients can pay for various goods and services with cryptocurrencies, enjoying low fees, high security, and fast transactions.
If your client is faced with a cryptocurrency transaction, there are two ways they can handle it. They can either accept the crypto itself like cash, or use a merchant processor that can convert it into your preferred currency.
Cryptocurrencies are also excellent for storing value. Especially while the craze still lasts, cryptocurrencies are mostly holding their higher-than-usual value. Bitcoin has seen a recent drop in price, but is still a major player in investment circles.
Service providers like Veem use the advantages of blockchain technology to send low cost, fast, and easily trackable global payments.
Unlike with real currencies, the value of cryptocurrencies is not influenced by any country or central bank. It’s the market alone that determines their worth.
An additional use of cryptocurrencies (along with their technological base, blockchain) is for transactions like fast and secure international payments. Service providers like Veem use the advantages of blockchain technology to send low cost, fast, and easily trackable global payments.
Last but not least, your clients can use cryptocurrencies as tokens or gift cards for fundraising campaigns or providing business loans.
There are two ways your clients can store their cryptocurrencies. Hardware wallets are USB-enabled storage devices that are specifically designed to keep cryptocurrencies safe. Like actual banknotes, these devices should be kept somewhere safe, especially if they hold a large value of cryptos.
If your client isn’t big on tangible gadgets, you can advise them to go for software wallets. These are apps that can be only accessed from your clients’ computer, making them extra safe.
Cryptocurrencies and Accountants
Funnily enough, when it comes to accounting, cryptocurrencies are not treated like currencies. Instead, your clients have to include their cryptos as current assets, since the IRS advised accountants to treat cryptocurrencies as property.
For taxation purposes, cryptocurrencies must be exchanged to their value in USD as of the date they were acquired. Your clients may realize a virtual loss or gain, depending on the difference in value of the dates of acquisition and tax filing.
Your clients have to include their cryptos as current assets, since the IRS advised accountants to treat cryptocurrencies as property.
If your client uses cryptocurrencies to pay for goods or services, they have to state the market value of it as taxable income.
Whether or not cryptos are here to stay, accountants need to know how to deal with them. Your clients will turn to you for advice, so it’s best if you prepare yourself on all things Bitcoin.