Survey suggests that regulation and guidance is required
With interest in cryptocurrencies rising, especially among younger investors, there are concerns about the transparency of crypto assets for tax purposes.
The challenges of crypto investors and their chartered professional accountants (CPAs) regarding the burgeoning sector are set out in an in- depth report from Blox.io, a cryptocurrency accounting and management platform.
This is an entirely new industry and most investors and CPAs are still learning the ropes. One of the biggest problems is the lack of infrastructure,” said Alon Muroch, CEO of Blox. “The more mainstream crypto transactions become, the more smart tracking and management tools become imperative. Human error can have serious implications. It comes as no surprise that most CPAs identified technology as a key component for the future of crypto accounting."
Just 5% of CPAs said that their clients – businesses and individuals – can accurately disclose their crypto assets and transactions for tax reporting.
Lack of understanding
An overwhelming 98% of CPAs said that the missing or inaccurate data is not necessarily wilful as many clients do not understand the rules. They want regulation and guidelines to address the issues.
"If a business created 1,000 transactions per day, to 100 different wallet addresses, for 30 different departments, organizing and searching for those transactions is a needle in a haystack scenario,” said Sharon Yip, Founder of Crypto Tax Advisors. “Relying on exchanges is also a dangerous game. Some only track a few months of transactions, while some shut down completely, leaving investors with no historical records of their transactions. This makes calculating profit and loss almost impossible and could even lead to legal repercussions."
The report shows 93% of crypto CPAs believe there will be smarter solutions and software in the not-too-distant future, while 81% specifically pointed to the need for increased automation for accurate record keeping and to establish best practices.