WithumSmith+Brown, a Princeton, N.J.-based firm ranked No. 25 on Accounting Today’s Top 100 Firms of 2018 list, has opened a digital currency and blockchain services group.
In the works for a year, the creation of the new service line was spurred by the “emergence of cryptocurrency in the public lexicon, in the technology industry and broader society we’re in,” said Chris DeMayo, a partner at Withum and team leader of the new group. “It’s a need amongst our clients we wanted to make sure we address.”
Indeed, cryptocurrency has existed since 2009, when Bitcoin was first introduced. Cryptocurrencies, often shortened to “crypto,” are digital assets built on blockchain technology. The term “currency” is somewhat of a misnomer, as the value of most, if not all, cryptocurrencies is too unstable to be considered as such. It’s more useful to consider crypto as a speculative asset, and indeed the IRS now taxes the tokens as property.
Now that taxation authorities have started taking cryptocurrency seriously as an asset, there is certainly a need for the accounting industry to create services around it. Withum’s Digital Currency and Blockchain Technology Services Group is made up of a team of 12 experts, including principal Deep Gujral, partner Carl Scheuten, manager Joe Murray and partner Ryan Babiak, among others. The firm also is a member of, or accredited by, various industry groups, including the Accounting Blockchain Coalition, which was established to foster best practices in navigating accounting issues related to digital assets, and the Wall Street Blockchain Alliance.
The firm expects clients of the new group to be diverse. “Cryptocurrency touches every industry,” said DeMayo. “We work with clients doing initial coin offerings, clients in the financial services industry that have crypto investments, and individuals who are heavily invested in crypto and dealing with tax consequences.”
DeMayo is bullish on the future of initial coin offerings (ICOs), a practice by which a company will offer cryptocurrency tokens ahead of the release of a product or a network of some kind. The company will use the money from the sale of the tokens to build that offering, and the token holders will then be able to use their tokens to benefit from whatever the offering is. Token investors are speculating on the ultimate value of the offering, but also on the value of the tokens, which will depend on the success of the product. Some may ultimately use the tokens on the product, or sell their tokens to others who want to benefit from the product, and make a profit from the sale.
“I think we’re gonna see a lot of middle-market companies offering tokens to the public, which will create a fairly substantial amount of complexities and regulations around that process,” DeMayo said. “Our group is already fully engaged right now and I expect it to expand.”
AT A GLANCE
Group name: Digital Currency and Blockchain Technology Services Group
Managing partner: Chris DeMayo
No. of staff: 12
Date founded: July 2018
Services: Audit, advisory, tax and more
Client types: Companies offering ICOs, financial services companies invested in crypto, individuals