The rise of cryptocurrency

Bitcoin—and its underlying blockchain technology—is set to transform the transactional universe, and presents a unique opportunity for more transparency in carbon-trading

If anybody needed evidence that cryptocurrency had reached “a moment,” news in early October that U.S. rapper Ghostface Killah—member of the iconic ’90s hip-hop group Wu-Tang Clan—was launching a $30 million “initial coin offering” (or ICO) might be Exhibit A.

Killah (born Dennis Coles) is just the latest celebrity to jump on the bitcoin train, following Paris Hilton and Jamie Foxx—each hoping to profit from an investor mood that’s increasingly sceptical of traditional stores of value. And, while some are hoping to cash in on the trend through ICOs—or in the case of Vancouver entrepreneurs Sean Clark and Marc van der Chijs, co-founders of First Block Capital, a cryptocurrency investment fund—others see a more fundamental, paradigm-shifting opportunity with the underlying bitcoin technology, known as blockchain.

Blockchain technology is something that has been on the radar of finance professionals, including CPA Canada, for several years now. In the world of finance, trust is everything—and blockchain represents the potential for an increasingly powerful model of transactional trust. In a nutshell, blockchain is a digital ledger of transactions, with unique characteristics designed to create records that are secure, reliable, transparent and accessible. While still in its nascent years, the technology promises to transform how information is managed—not just in the financial sector, but in any number of professions where record-keeping, reporting and assurance practices are critical.

Perhaps one of the most profound opportunities with blockchain technology rests in the world of sustainability reporting and climate change solutions—a growing focus of CPAs across this country. On October 20, 2017, CPA Canada will host a panel discussion, in conjunction with the University of Toronto’s Environmental Finance Advisory Committee (EFAC), entitled “Blockchain: Building the Environmental Link.” It will explore how the technology might be used in managing carbon markets—particularly cap-and-trade systems, such as the one currently being pursued by California, Quebec and Ontario. Cap-and-trade has long been criticized as a somewhat opaque way of handling carbon emissions, so the introduction of a disintermediated means of tracking carbon-credit transactions is seen as a way of boosting transparency—and thus, the efficacy of such programs.

Whatever its end use—to manage financial transactions, track carbon emissions, or present a more secure store of value—blockchain technology will undoubtedly upend the conventional way of doing business. The need for intermediaries, such as financial institutions, to act as “trust” agents will diminish, with this new technology providing greater security and accountability than ever before. As Kathryn Haun, the digital currency coordinator for the U.S. Department of Justice, recently told Forbes magazine: “What cell phones did to pay phones, cryptocurrencies will do to ATMs and bank branches. As cryptocurrencies scale, people will use them for payments because of lower fees, less friction, and greater privacy… It’s now cheaper and faster to FedEx a box of cash than to send an international wire. Cryptocurrencies are poised to change that calculus.”

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Disclaimer

This article is for informational and entertainment purposes only, and should not replace professional advice.

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CPA Canada