Summary of modules – Crash Course for Professionals
Module 1: Talk Crypto
Blockchain overview:
- A distributed ledger storing permanent, immutable (can not be altered) records in “blocks.”
- Includes all details, including wallet address, fees, and it is date & time stamped.
Types of blockchains:
- Bitcoin: Original blockchain for decentralized payments.
- Ethereum: Introduced smart contracts for decentralized apps (DApps).
Consensus mechanisms:
- Proof of Work (PoW) Computational power confirm transactions.
- Proof of Stake (PoS) Validators stake crypto to validate transactions.
Blockchains by layer:
- Layer 1 Processes/validates transactions (e.g., Ethereum).
- Layer 2 Improves speed/costs (e.g., Arbitrum).
- Layer 3 Highly specialized programming for distinct use cases.
- Layer 0 Interoperability across blockchains (e.g., Polkadot, Cosmos).
Cryptocurrency basics:
- Coins: Native to blockchains (e.g., Bitcoin).
- Tokens: Created for specific uses, often across multiple blockchains.
Module 2: Crypto Use Cases and Ecosystems
Decentralized finance (DeFi) vs Centralized finance
- Centralized finance: Custodial, centralized authority.
- Decentralized finance: Self-custody, no centralized authority (community driven such as via a DAO).
Use cases:
- Earning rewards and other forms of revenue.
- Practical crypto use cases: Loans, payments, ownership proof, remittances.
Benefits of digital currencies:
- Lower fees, faster transactions, decentralized governance.
DeFi tools:
- Decentralized exchanges, market and performance tracking, yield comparison.
Wallet types:
- Cold, hot, multi-sig, and web wallets, each with varying security levels.
Web3 ecosystems:
- Interconnected platforms that often include user engagement for development and guidance.
Data security practices:
- Use 2FA, secure private keys, and beware of scams.
Module 3: The Demand
Crypto adoption growth:
- Increasing crypto investment, especially among Gen Y & Z and more recently corporations.
Tax authoritiesʼ response:
- International efforts to improve crypto tax compliance with reporting frameworks especially via CARF.
Why accountants should incorporate crypto:
- Growing client demand for accountants with crypto knowledge.
- Revenue opportunities in amending crypto tax filings.
How to incorporate crypto into accounting:
- Educate yourself, develop crypto-focused services, engage in crypto communities.
Module 4: Critical Issues in Crypto Taxation
Common pitfalls:
- There are many pitfalls that can result in incorrect tax reports such as data export limitations, bots, burning fees, cross-chain rewards, and time zone discrepancies.
Taxable transactions that are unique to cryptocurrency:
- Liquid staking, liquidity pools, NFTs, smart contracts, and flash loans.
Why pitfalls go unnoticed:
- Several dozen data issues are not flagged in tax software.
- Personal familiarity with crypto platforms and expertise in crypto transactions is required to ensure accuracy in gain / loss and ACB reporting.