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FTX collapse, FASB vote on crypto and more covered at OSCPA Town Hall
Written on Sep 28, 2023
By Jessica Salerno-Shumaker, OSCPA senior content manager
While no one can be an expert at everything, one CPA said cryptocurrency is worth understanding for its long-term impact on accounting.
“The approach I take is trying to see bigger picture trends and to capture the opportunities created by these big shifts in how business works and how that impacts us on an everyday basis,” said Dr. Sean Stein Smith, who is an associate professor at the City University of New York Lehman College.
Smith joined OSCPA President & CEO, Scott Wiley, CAE, last week as they discussed the evolving world of cryptocurrency and uncovered some of the risks and opportunities. Smith has written for Forbes.com on the impact of these emerging technologies on accounting, financial reporting, and data governance and is also a strategic adviser to the central bank, digital currency think tank
Smith noted that when FTX, a popular cryptocurrency exchange, collapsed in November of 2022 it changed how many people view crypto from a risk perspective and has also contributed to the SEC and the IRS becoming more aggressive in adding transparency to the space.
“The ongoing bankruptcy case, not to mention the actual criminal case, has uncovered that even though FTX was in the crypto business, the underlying issues of controls, governance and risk management are not crypto-connected,” Smith said. “They're very basic business problems that, in hindsight, any auditor working with FTX, should have uncovered.”
Smith said FTX isn’t just about crypto failing, it’s “…an indictment of the management team, and the lack of transparency in crypto from an accounting side.”
FASB recently voted to set a new rule on cryptocurrency accounting and disclosure, a change Smith said he was happy to see. They voted unanimously to adopt a new standard that would require businesses to use fair-value accounting for Bitcoin and certain other crypto assets, a change firms and the industry have been asking about for years.
“It's an excellent first step, and it opens up that door to further crypto in accounting rulemaking,” Smith said.
The evolution of cryptocurrency is one to keep an eye on, he said, as banks continue to develop their own tokens and further ingrain themselves as players in the crypto space.
“Overall, I'm still cautiously optimistic for the broader adoption of crypto assets to be used as a medium of doing business, and also blockchain as a way to store share and to transfer data,” Smith said. “Bitcoin by itself on an island is being treated more and more as an asset class.”