“The market moves so quickly that it’s sometimes hard to keep up,” says Chris Smith, director of Personal Tax Compliance at BKL. “However, there aren’t many accountants out there specialising in cryptocurrency.”
The cryptocurrency market is worth a whopping $940.74bn (£813.24bn) as of July 2022, according to Bybit, the cryptocurrency trading platform. Despite the market’s ups and downs, over 83 million people have created Bitcoin wallets on Blockchain.com, and Bitcoin has grown by 30% since June.
With the number of global crypto owners almost tripling in 2021, from 106 million in January to 295 million in December, Crypto.com predicts the number of crypto users will hit one billion by the end of 2022.
However, not many people understand these currencies and the tax implications, hence why BKL built a crypto department within its tax team. “Given the way that Bitcoin was sitting on substantial holdings of tens of millions of pounds, there was a need for tax advice on how to deal with that holding,” Smith says. “We envisaged a huge need for tax advice in the crypto space, so our aim was to build upon it.”
How does this work differ to other departments in the firm?
The crypto market is constantly changing, meaning that BKL is constantly having to keep itself up-to-date. “Clients come in and something quirky has come up, so we have to research and try to understand what’s going on, but we’ve got good base knowledge to understand it”, notes Smith.
In many cases, accountants deal with taxpayers who are mature to the tax system. However, entering the growing crypto market is a younger, more dynamic crowd who “don’t have the education” in taxes or the account system, so there’s some more “hand-holding” and patience involved when talking to clients.
“If we put the traditional tax advisor, the stereotypical guy in a suit sharing tax advice to these young guys, they’re less receptive to it, so the approach can be a little bit different,” Smith explains. The younger demographic prefer a younger, dressed-down, free speaking advisor who works through a more modern approach, such as through Teams.
Challenges to keep in mind
“It’s a growing market space and there’s a lot of work there,” Smith says. “Being a specialist in the sector and promoting that will create a constant stream of work because it’s a need, and there’s not many advisors that can touch it at a very good level.”
However, delving into the crypto market can be time-consuming for accountants, especially in the area of staffing as employees will require thorough training to be able to understand the market. “It can also be an educational piece to clients, so it’s more time consuming in dealing with clients.”
Additionally, the crypto market comes with a range of anti-money laundering (AML) issues. Smith says: “The reality is that it is different to a standard AML check for a client; there are concerns on the regulation side and protecting the business.”
He adds: “It’s a very specialised area that can blow up; if the advisors are not keeping up to speed with it all, they can find themselves caught in a hole. You have to be confident that you carry out the right checks, making sure that businesses are compliant and quite happy with the work that you’re taking on.”
How firms can launch a cryptocurrency division
According to Smith, accountancy firms must first evaluate whether they are launching the department to address the needs of a few clients, or if they are interested in creating a team within the current workspace. As such, firms must ensure they have the right knowledge and the right software behind them to get started on the right foot, he explains.
Secondly, firms must update themselves on revenue guidance, and have a genuine interest in the field. “There’s absolutely no point in somebody picking this up if they don’t care about the market and if they don’t follow what’s going on,” he says. “The market will move quicker than what they will; they will fall behind and end up doing something which will have a negative effect on the client.”
Smith emphasises: “If firms are out there that want to do this seriously, you can’t rush yourself into it. You must get the expertise, have a full understanding of cryptocurrency, and you’ve got to have an interest.” Otherwise, there are the dangers out there that mean “it’s just not worth taking risks.”
Thirdly, firms must look at different marketing methods, beyond just a page on the company’s website. As such, firms can discover which platform the discourse is being held on by the community and get involved with these individuals through direct marketing to get the business’ name out there, such as through blogs.
He concludes: “Try to do things differently and target individuals who aren’t after the bog standard advice, they’re after something a bit quirky. We found that it’s extremely successful to target something very technical in a particular field, and target clients or potential clients who it affects.”