Blockchain: accountants must evolve and get with the programme
ICAEW member Alexis Nicolaou says blockchain is forcing accountants to evolve, get clued up and jump on board with the fourth industrial revolution.
The risk is real. If accountants do not have an understanding of the technologies that underpin the fourth industrial revolution, they risk going the way of the dinosaurs.
Nicolaou lists these underpinning technologies as: blockchain, internet of things, artificial intelligence and big data. “They form the future and are not leaving any sector untouched, including accounting,” he says.
They are becoming commonplace in business and the home, but perhaps the application of blockchain to the tasks commonly undertaken by the profession is the most obscure. He is all about bringing clarity where there is confusion, and is evangelical about conveying blockchain to the profession, business, government and beyond.
Nicolaou is the CEO of Block.co, a company immersed in blockchain technology and a spin-off from the University of Nicosia, and is also a Director at Grant Thornton Cyprus, heading its Distributed Ledger Technology business unit.
Nicolaou himself is a graduate of the UK’s Nottingham University, and worked in the profession in London until the year 2000 when he returned to Cyprus. He spent 10 years as the CFO of a large media group and a further five as CEO. In 2004, when the business launched Cyprus's first online news portal, it became obvious to him that digital was the direction of travel for everyone.
In 2015, he moved into a career in electronic banking where he could see that technology was changing peoples’ banking habits. “This led me to discover blockchain, with digital currencies being the first application of the technology,” he says. Last year he completed his MSc in Digital Currencies and Blockchain Technology.
Blockchain and the other technologies we associate with the fourth industrial revolution will, he says, remove a lot of the manual work, like reconciliations, that accountants currently perform: “Accountants will take more of a consultant's role to the enterprise, and will be required to bring value that software cannot offer a business.”
He continues: “We need to develop characteristics that involve emotional intelligence and analytical thinking – something that a machine cannot replicate. We need to be better evaluators of situations, learn to assess circumstances and conditions that an enterprise is facing, and have the analytical foresight to offer clients valuable advice.”
He concedes it is still early days; so there is no need to panic: “Blockchain is at the phase the internet was at in the early 1990s.” However, it was important for him and for Grant Thornton to be early adopters.
“In 2018, we knew the opportunities were limited. People would not be queuing up for our help; but we knew that the need would explode and we needed to be there. We had to educate people about what this technology is,” he says. “Blockchain is not Bitcoin. Cryptocurrency is just the first application of the technology. We ran a lot of seminars, wrote articles, participated in a lot of conferences. Our message was that blockchain can bring about the necessary changes to the enterprise.”
In the public sector, legislation is likely to be needed before blockchain can be embraced. That legislation is currently going through its drafting paces in Cyprus.
The connection with the University of Nicosia is important. In fact, in the global university rankings, the University of Nicosia comes out top for its blockchain courses, ahead of MIT and Cornell. This University of Nicosia spin-off – Block.co – has developed a SaaS platform that is commercialising a blockchain technology that was developed by the university in 2014. At that time, it was the first university to issue graduates with certificates on the blockchain.
The certificates look just like any pdf; the difference is that graduates can share them with any future employers and, because the certificates are anchored on the blockchain, employers can easily verify the authenticity of the certificates without reaching out to the university. “They would simply drag and drop the pdf file into a validator that we put on our clients’ websites, without contacting the university at all,” Nicolaou says.
“The validator picks out the meta data that we embed behind the pdf and finds the matching meta data (that was placed on the blockchain when the document was issued). There is no way anyone can change a single pixel on that document,” he says. “Think of all the documents that this could apply to. Think of a world where no document can be faked.” Block.co has now developed solutions for a great number of industries, including the legal profession, insurance, health, banking, local authorities, art and government.
He continues: "This revolutionising technology effectively gets rid of the middle man. You do not need the registrar of companies or a certifying officer to validate a company certificate. You do not need a university to validate a degree. Accountants will not need to validate the documents to a transaction. The blockchain will do it.”
He then turns to the thorny issue of auditing crypto assets – currencies, properties or anything else that can be documented – all that documentation can be held on the blockchain. These assets will increasingly be carried on companies’ balance sheets. “Accountants will need expertise on how to validate the existence, ownership, accuracy and valuation of these assets held on the blockchain, as well as transaction occurrence,” he says. “All professional service-providers will have to become better acquainted with this nascent technology.”
Importantly, he adds, you cannot erase anything on the blockchain. The audit trail is there for good and this will resolve a great number of issues. It will also bring the professions together, into a new era and with a new technology that could potentially validate everything.