Bigger than blockchain
Blockchain is more than a buzzword — it’s a big opportunity for accounting firms to provide services around the technology, which powers business innovations like cryptocurrency and smart contracts. Atlanta-based Top 100 Firm Aprio has been ahead of the curve, having opened a blockchain practice six years ago and, as vanguards in the space, established the firm as an early thought leader in the technology.
Leading that effort are Mitchell Kopelman, partner-in-charge of the firm’s tax practice and technology & blockchain group, and Jagruti Solanki, assurance partner specializing in technology and blockchain. They head up the group in providing blockchain assurance, accounting, tax and consulting services, covering a range of regulatory and operational issues.
The practice essentially began with one client, a digital-asset/crypto-payment processing company. Aprio had established a technology practice 30 years ago, but the expertise needed to service this blockchain client was more specialized. Kopelman calls the firm fortunate to have gotten “involved in blockchain six years ago, before most people knew what bitcoin or blockchain was.”
Even as education around blockchain has advanced, bitcoin is most often associated with the technology. Blockchain is a distributed, decentralized, ledger that stores information in a database keeping permanent record of any modifications. Using this technology, bitcoin and other cryptocurrencies can be exchanged between parties with no intermediary.
The affiliation with cryptocurrency fostered some initial uncertainty and miseducation about blockchain, according to Kopelman.
“Bitcoin [was associated] with illegal transactions,” he explained. “It started out with negative publicity, with negative connotations and skeptics… people associated bitcoin with illegality. That exists, but it’s not like that didn’t exist with wire transfers, cash… It got a bad wrap initially [but] some people realize bitcoin is bigger than illegal transactions… some people are realizing blockchain is bigger than bitcoin.”
The 35 to 40 clients Aprio serves in its blockchain practice are well aware of blockchain’s broader applications--as many are technology and financial technology companies.
“In fintech, many companies receive money transmitter licenses in this country,” Kopelman explained. “Our blockchain practice came out of our fintech practice; we have a huge fintech practice.”
Born out of financial technology, Aprio’s blockchain practice has gone on to touch many of the firm’s services and specializations, including its large manufacturing and distribution client base.
“There are about 110 people working in the technology practice, and some of those people [focus] on traditional software versus blockchain, but pretty much everyone working in the technology practice is working on blockchain clients,” explained Solanki. “Some people are very focused on blockchain. The risk assurance practice, with SOC 2, ISO 27001, GDPR…. They’re predominantly working with fintech companies. There’s a fair amount of people in valuation, and in M&A — everyone is touching blockchain in that respect. Looking at blockchain as part of technology, it even bleeds into manufacturing and supply chain companies using blockchain.”
The practice still serves “primarily technology companies,” but “what’s changing is we are spending a lot of time working with companies in other industries, adopting blockchain to their business practices,” Kopelman said.
As more and more industries adopt the technology, the accounting profession must be prepared, warned Solanki, who speaks about blockchain at various industry events, teaches classes for state societies, and is part of an American Institute of CPAs committee exploring digital assets and submitting recommendations for much-needed guidance.
“We recognized early on, as accountants, there is not a whole lot of education out there,” she said. “We can’t continue to do what we’re doing without changing the way we think, and our internal knowledge. We do that with our staff, in our technology niche groups, internal education and external education to our clients and companies… We didn’t see a whole lot of CPA firms out there, midsized and smaller sized, trying to understand that space in 2013 when we entered it.”
Solanki counts client acceptance, understanding and doubt among the biggest hurdles for other firms in accepting blockchain clients.
“There’s uncertainty about whether this is a space they should jump into. One key thing for any CPA firm is, our profession is going to change. From an audit standpoint — five to six years ago we had to audit a crypto-payment company. We couldn’t audit the way we would normally audit for a non-blockchain [company]. You have to understand blockchain technology, as the audit procedures for such companies are different; that’s just the nature of business and technology. The way we look at it, you have to jump in, and understand the technology to solve that.”
Solanki points to the example of Walmart, last year, announcing that food suppliers will be required to use Walmart’s blockchain “Otherwise, vendors can’t do business with Walmart,” she explained. “[They will be] forced to use someone’s blockchain technology, and not understanding what blockchain technology is. They will be forced to use it; how will that impact our profession. We have to think forward, to help these kinds of vendors, so we are not reactive but more proactive.”
As Solanki and Kopelman help lead the conversation, they await regulatory input.
“Jagruti is talking about best practices,” Kopelman said. “There is virtually no guidance from the IRS — we might get some shortly, but not a whole lot, besides what was put out a few years ago. The AICPA submitted more than 140 recommendations; we were part of the AICPA working groups that started over a year ago on blockchain. Hopefully we get guidance this year.”
In addition to blockchain, Aprio has expanded its advisory and consulting practice into other cutting-edge technology like artificial intelligence and machine learning, while keeping an eye out for the next big thing.
“For 30 years we’ve been working with technology companies,” Kopelman said, “and with every new wave there’s been, our people have had to learn and understand--before the cloud, before the internet. [We’ve been serving] technology companies before the internet existed. Over the years, we’re learning other technology; new ways of how to make this world a better place. At the end of the day, blockchain, you can use it for good, use it for bad. It keeps me excited for my job everyday. I’ve been working in the technology sector for 30 years, tax-focused for me, to stay current in the leading technology. Another five years, it’s something else. Blockchain will not be the last technology to be developed.”