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What are Crypto risks for Accountants?

 

How is crypto a risk for accountants?

Cryptocurrency presents several risks and challenges for accountants in Australia, stemming from its complex and rapidly evolving nature. These risks can be broadly categorised into regulatory, technical, and professional challenges.

 

1. Regulatory and Tax Uncertainty

Lack of Specific Tax Law

While the Australian Taxation Office (ATO) has provided guidance, there is no bespoke taxing regime for crypto activities. Tax treatment often depends on a principles-based approach, applying existing laws like Capital Gains Tax (CGT) or ordinary income provisions. This creates ambiguity, especially for complex activities such as:

    • Staking

    • Decentralized finance (DeFi)

    • "Wrapping" crypto

Constantly Evolving Rules

The regulatory landscape is in flux both in Australia and internationally. New types of crypto assets and financial products are continually emerging, and the government is still developing a comprehensive framework. Accountants must stay informed to avoid giving outdated or incorrect advice.

Record-Keeping Obligations

The ATO requires detailed records for all crypto transactions, including:

    • The date of the transaction

    • The value in Australian dollars at the time

    • The nature of the transaction

For active traders, this can be a significant challenge. Accountants are responsible for ensuring clients maintain these records. Without them, compliance issues can arise, and inaccurate reporting may create personal liability for the accountant.

 

2. Technical and Operational Risks

Complexity of the Technology

Cryptocurrency is built on complex technologies like blockchain. Accountants need to understand:

    • Differences between types of crypto assets

    • How assets are held (hot wallets vs cold wallets)

    • Implications of blockchain splits or forks

This technical knowledge is critical to provide accurate advice.

Security and Fraud

Crypto is a high-risk area for scams and hacking. Accountants may need to guide clients on security best practices, including:

    • Using reputable exchanges

    • Securing wallets

They also need to be aware of the tax implications of crypto loss, such as claiming capital losses.

Difficulty in Valuation

The high volatility of crypto assets makes valuation challenging. Accountants must determine the Australian dollar value of a crypto asset at the exact time of a transaction, which can be difficult to track and prove, especially for smaller or less-liquid tokens.

 

3. Professional and Ethical Challenges

Need for Specialised Knowledge

The demand for accountants with crypto expertise is growing, but the supply is limited. Accountants who take on crypto-related clients without sufficient training risk providing substandard advice. Professional bodies such as CPA Australia and Chartered Accountants ANZ have emphasized the need for better blockchain literacy and more specific accounting standards.

Ethical Considerations

Accountants have a professional obligation to provide informed and ethical advice. Given the speculative and volatile nature of many crypto assets, they must:

    • Ensure clients understand the risks involved

    • Avoid acting as financial advisors unless licensed

Client Management

Clients may have poor understanding or insufficient record-keeping. Accountants are responsible for educating clients on tax obligations and the importance of detailed records. Failure to do so can expose the accountant to risk.

 

4. Institutional-Grade Security Considerations

While not explicitly mentioned in every accountant risk article, the security of crypto holdings directly affects accountants’ responsibilities. The current options for custody—self-custody or exchange custody—are inherently insecure:

  • Self-custody: Devices, passwords, and backups can be lost.

  • Exchange custody: Exchanges are often undercapitalized for catastrophic losses; 2024 saw record hacking and exchange failures.

Institutional clients demand licensed custody with blocked withdrawals, offered by providers like Zodia, which is bank-backed (Standard Chartered, NAB). Platforms claiming “Fireblocks” security actually rely on Zodia for institutional-grade custody.

For accountants advising SMSF or high-value crypto clients, recommending assets are held under institutional-grade, licensed custody reduces risk exposure.

 

Summary

For accountants in Australia, cryptocurrency is a minefield of:

  • Regulatory ambiguity – principles-based tax rules, evolving laws, complex obligations

  • Technological complexity – understanding wallets, transactions, and blockchain nuances

  • Professional challenges – ethical duties, specialized knowledge, client management

While crypto offers opportunities to attract new clients, it also requires meticulous record-keeping, constant education, and careful oversight to mitigate the risks. Accountants must ensure clients understand the risks, maintain proper documentation, and ideally use institutional-grade security solutions to protect assets and reduce professional liability.

If you need assistance or want to learn more, our Specialist team is here to guide you. Feel free to reach out anytime for support or more information.