Can cryptocurrencies change Venezuela economy?
When the financial crisis of 2008 broke out, cryptocurrencies appeared, specifically, as the Bitcoin that opened the doors of a completely unknown world until now. It will then be presented as an alternative to traditional currencies, have been devalued enough due to the crisis and began to expand to a new digital system, with the power of monetary asset holders (safeguard) their capital in cryptoactive and not see affected for the consequences.
In the current financial world it is the refuge of the holders of dollars, physical assets such as gold and oil, precisely to overcome the ups and downs of that currency. Cryptocurrencies are increasingly being used for these purposes and, in essence, could have a collateral and important impact on the price of goods.
Virtual currencies depend on themselves and on users. They are also a bank and the money that can be moved at will, according to the transactions they want to make at any time. Thus, little by little, cryptocurrencies have made a place in society and, today, there are many users who use these cryptocurrency to maintain their own capital, and many functions of governments in many countries.
A weak side of cryptocurrencies is that, through them, capital from illicit activities can be legitimized. This means that it is very likely that the purchase of cryptocurrencies or large-scale mining (through "mining farms") is also boosted in some cases by factors outside the law. For the global financial system and governments, this is a matter of interest. Well, we are talking about the incorporation into the real economy (through digital channels) of huge resources, which in other occasions they will give to tax havens at the expense of big commissions and corruption charges. Many bankers and politicians do not like this.
The following lines will focus on the accounting treatment of cryptocurrencies considering the accounting framework that is currently in force in Venezuela. Before developing the technical accounting part it is important to know that cryptocurrencies are a means of value exchange, which uses cryptographic techniques to control the creation of monetary units, prevent double spending and verify the transfer of funds. Currently there are more than a thousand cryptocurrencies, the most popular being Bitcoin.
Like most currencies, the cryptocurrency does not have an underlying value since it is not supported by some other asset, such as gold. However, unlike other currencies, the cryptocurrency is not supported by any country, government or legal entity, has no physical form and is not legal circulation, understanding the latter as authorization by the central bank to circulate in the economy as a payment currency. Additionally, its issuance is not regulated by any central bank and all transactions are made and validated among users, without the need for intermediaries.
The speed, ease of use and cost savings associated with this type of currency has made it a rapidly growing medium of exchange, where global and local companies already accept payments with cryptocurrencies, even recently PwC Hong Kong accepted Your first payment in cryptocurrency.
Even though the main functionality of the cryptocurrency is to dispense with trusted third parties to carry out transactions, to date its popularity is more linked to the fact that most cryptocurrency investors have done so because of the interesting capital gains that these investments have represented. .
Investments in cryptocurrencies can be large in terms of monetary value and at the same time very volatile in terms of their market value, so that they could become a relevant area for users of financial statements. However, current accounting principles were not written considering cryptocurrencies.
If we ignore for a moment what the current accounting principles in force in Venezuela indicate, most public accountants would probably agree that the best way to account for cryptocurrencies would be at fair value, recognizing the effect of fluctuations in its value in the income statement, since it would resemble the value at which investors could make their positions in cryptocurrencies or could trade to obtain goods or services.
Accounting rules are happening to them the same as many other norms and processes in the legal, educational and social spheres: they have not been able to evolve as quickly as technological developments.
The first option to be able to measure the cryptocurrencies at their fair value, it would seem that they were classified as a financial asset and that is where we found the first problem because the cryptocurrencies:
- They are not legal tender (they do not have authorization to circulate as currency);
- They are not cash equivalents because their value is exposed to significant changes in market value; and
- There is no contractual right to receive cash or cash equivalent.
It seems that the current accounting standards leave us with two alternatives: as an inventory or as an intangible asset.
If they were recognized as an inventory, cryptocurrencies should be measured at their acquisition cost. In any case, we could disclose, as it is considered relevant for the users of the financial statements, the value
reasonable, however, this would be a partial solution. Additionally, they would be exposed to an impairment assessment due to changes in the net recovery value.
Now, if the cryptocurrencies were considered an intangible asset, the default position indicated in the standard would also be to measure them at their acquisition cost. There is a possibility within the intangible standard, that if the entity is able to justify that there is an active market for cryptocurrencies, it can apply the alternative treatment and measure the cryptocurrencies at their fair value. In this scenario, changes in fair value would be recognized in the statement of Other Comprehensive Income (ORI) in equity, and the gain would not pass through the income statement in the event that cryptocurrencies are sold.
In conclusion, if we agree that cryptocurrencies recorded at their fair value with the fluctuations recognized in the income statement represent the best and most useful way to reflect these assets in the accounting, it would seem that the current accounting standards in force in Venezuela , they would not allow this.
The issue of cryptocurrencies sooner rather than later will be on the agendas of both the IASB and the FCCPV, so more specific accounting guidelines and pronouncements could be expected in the near future.
"The Nobel Prize for Economics Joseph Stigllitz, says that there are those who are looking for an alternative currency to participate in money laundering and tax evasion activities." This is really false, virtual currencies are a means of payment that could generate many benefits to the economy facilitating transactions and realizing them in real time. There is no bad money, there are good and bad people with money.
"The so-called mining is to order mathematical operations that verify the validity of transactions in bitcoins through the use of state-of-the-art computers", this postulate turns out to be a fallacy, because high-tech equipment is not necessarily needed, and it can even be mined with small equipment. easy access.
"There is no transparency about who is involved in what transaction and for what." This postulate by Stigllitz covers only part of the security analysis presented by the coins. Recently one user entered the wallet of another, but they discovered it and is currently in jail, that means that there is transparency, since the blockhain has several nodes that have a backup of everything registered.
"The market for cryptocurrencies is always rising", this postulate is false, the cryptocurrency market is not always up, presents highs and lows, even people take advantage of this phenomenon to market and increase their income. Being that the purpose, to win, can also be lost, the market is fluctuating.
There may be opportunities for professional development in the world of cryptocurrencies?
Of course, there may be opportunities for professional development in the world of cryptocurrencies. Even now the results are seen, people who bet on this market are currently the most quoted worldwide. Professionals in the computer and systems air are requested to install systems where the blockchain is handled. Persons in charge of air, administrative, accounting and economic will be more competitive to the extent that they work and understand this world of virtual money. And at the same time they can make their payments of goods and services to newspapers.
Some companies currently have facilities with structure, technology and human talent necessary for each of the potential customers who wish to enter the virtual money exchange industry to live the best experience, with the security, confidence and transparency necessary to complete successful transactions.
Commercial consultants are needed who have adequate training to perform all the procedures related to these virtual currency exchanges and also have the technological equipment to carry out these tasks.
Publicado en el blog de Cryptofera