Offerings Your Business a Cryptocurrency Equivale
Bitcoin and other Alt-coins are becoming more prevalent, understanding how they will affect your balance sheet and accounting practices is very significant. The world of ICO’s and cryptocurrencies is a bit of a mystery.
Here are some simple definitions and a quick guide to how these coins work:
- Bitcoin and Alt-coins are all cryptocurrencies. As opposed to FIAT currencies backed by a national bank and available in paper or other formats, crypto currencies exist online only.
- They live in a format called blockchain
- Blockchain is a type of software that people are calling the next internet. All blockchain transactions are in the public domain. Anyone can see what you are transferring.
However, due to a 22 letter code, no one knows who is doing the transactions, for example, someone has sold 24,000 bitcoins to someone else for a lot of money,
but we don’t know who was involved in the transaction.
- An ICO, Initial Coin Offerings, is the cryptocurrency equivalent of IPO.
- Entities or companies will launch a new coin with a website and whitepaper, they will usually limit the number of coins initially offered and a hard-cap.
- The value of the coin is tied to the company like shares and increase and decrease in value according to demand.
However, if there is no transfer of documents and most activities are confidential, how can you account for this in a company’s balance sheet?
How do you assess the value of something that only exists as bits in cyberspace and how many companies are using cryptocurrency to move money without falling afoul of currency regulations. As with any new area, cryptocurrencies are complex and require someone with expert knowledge to handle this. When a company decides to go down the route of ICO, or acquire crypto currency it is paramount to use the correct advisers as the basis to successfully transferring transparency and authenticity.
The ICO world today is not heavily regulated like an IPO, therefore there are many ICO’s that are merely a scam.
By delivering high-end data to your potential investors, (coin acquirers) via your whitepaper, signed off by leading advisers, supports such confidence you need to achieve.
On another note, many companies today are receiving payment in crypto currency and authorities are catching up on regulatory positions.
This leads to the importance of making sure your company is compliant.
As the leading financial management firm in Israel, our teams are here to support your company with your crypto dilemmas.