The most important crypto accounting lessons of 2022
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The most important crypto accounting lessons of 2022
Plus predictions for where the industry is heading in 2023
Happy Thursday!
We've reached the end of the year, and this is the tenth and final edition of our newsletter for 2022. Thank you for allowing me to pop into your inbox and be a part of your weekly routine.
As we wrap up this year, I want to make sure that DeOps Weekly is as helpful and engaging as possible for all of our readers. If you have any thoughts to spare, I’d love to hear from you on Twitter or LinkedIn.
This week’s topic
🔮 The most important crypto accounting lessons of 2022
From the euphoria of the bull market to the deep bear market, 2022 has been a whirlwind of a year. But I believe the challenges of this year will forge the way to make our industry more resilient and value-aligned.
As we wrap up the year, this is an opportunity to reflect and break down the hard lessons of the last twelve months and share predictions for 2023, specifically for crypto accounting.
Lessons learned in 2022
Internal controls are sorely lacking for crypto companies. Founders control the keys, and finance teams are left to make sense of the data. Not only does this lead to FTX scale disasters, but it also creates massive inefficiency in the finance departments of countless other crypto businesses.
Trust but verify. Trusting the custodians of our crypto assets is not enough. We must make Proof-of-Reserves and Liabilities the standard to which all crypto custodians are held.
First-hand experience is crucial for accountants. Crypto accounting is becoming increasingly complex. The easy programmability of DeFi and NFTs forces finance to consider accounting and tax treatments for brand-new assets. The only way to make effective decisions is to understand the underlying protocols. The accounting firms in our network that are growing the fastest are the ones who take the time to actively experiment with DeFi and NFTs.
Predictions for 2023
Operational excellence becomes a requirement for crypto companies. With the bear market requiring startups to operate with ruthless efficiency, teams will prioritize financial prudence, which starts with accurate and complete financial reporting (investors and boards will also demand this).
Accounting breakthroughs make the news. Spurred by Coinbase and Vitalik Buterin’s essays about on-chain accounting and proof-of-reserves, we will start to see the introduction of brand-new accounting technology fueled by cryptography.
Regulations pave the way for crypto accounting best practices. Recent events will trigger the FASB, IRS, and CFTC to unveil new regulations for the disclosure and treatment of crypto assets. This will be a net positive for the crypto industry at large and will set the foundation for how companies operate in the next bull run.
With more regulatory clarity, more accounting firms enter the space. In the last six months, we’ve already seen an explosion of firms servicing crypto clients. The additional clarity and subsequent training offered by industry groups will give confidence to accounting firms that this new market is one they can’t miss out on any longer.
What do you think? What are your biggest lessons and predictions? Leave a comment and let me know.
From the DeOps World
📚 What we’re reading
Accounting firm Armanino ends crypto audit practice
After eight years in crypto, the accounting firm behind FTX’s audit decided to call it quits on their crypto practice and drop crypto clients. Their failure will drive higher demand for firms to be diligent in their audits.
Messari Crypto Theses 2023
This is the most anticipated crypto report every year. It’s a long read but well worth it to stay updated on all aspects of the industry.
Dive deep in the full report from Messari or this Twitter thread from Selkis
FASB addresses crypto asset presentation and disclosure
Last week, FASB reached a consensus on crypto asset financial statement presentation and required disclosures. KPMG outlined the decisions and what lies ahead in 2023.
Check out the summary from KPMG
Listen & Learn
🎧 On-chain Accounting is the Future with Trevor Ward
How do crypto accountants stay up to speed in a rapidly evolving industry?
Trevor Ward, CPA, co-founder and CEO of Multisig Media joined me on the Decentralized Ops podcast to discuss the latest in crypto accounting and how to best educate accountants about crypto.
Listen to the full episode with Trevor
Work in web3
👾 Web3 Accounting Job Alert
Binance.US is hiring a Head of Internal Audit. This is a great opportunity for senior-level accountants to break into the crypto industry.
Apply for the job with Binance
That’s all — and happy holidays to you and yours. Thanks for reading and I’ll see you in 2023.
Cheers,
Gil
Brought to you by Gilded 💡
This newsletter is strictly for informational purposes only and does not constitute financial, investment, or tax advice. As always, do your own research.
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