Blockchain & cryptocurrency legislation emerging in state legislatures

As blockchain becomes more common in everyday business operations, state legislatures are looking at how it may be regulated. These proposals could impact CPA firms with clients who own digital currencies like Bitcoin, as well as firms that are interested in using the technology in their own auditing and accounting services.

The AICPA’s State Regulation and Legislation Team has identified blockchain legislation in half a dozen states thus far, and more states are likely to introduce similar proposals throughout the year:

Blockchain Technology

• The New York State Assembly introduced a bill that looks at the possibility of using blockchain technology for state record keeping, information storage and service delivery. This could impact CPAs and CPA firms that work in government accounting.
• The Tennessee legislature is considering legislation to recognize the legal authority of smart contracts created on the blockchain.
• Arizona introduced a bill to include blockchain in the definition of electronic records and electronic signatures. The goal is to recognize the legitimacy of transactions created on the blockchain. As states work out how to recognize and regulate these transactions, it will have a big effect on how CPA firms can move forward with the technology.

Cryptocurrency

• The Hawaii legislature introduced a bill to create a uniform regulation of virtual currency businesses. This legislation would apply to any person or organization that engages in virtual currency business activity with a Hawaii resident – meaning that even firms outside the state should monitor this bill if they do work with Hawaii residents.
• The New Jersey legislature is interested in having more digital currency businesses operating in the state. It is considering a bill that would establish a regulatory framework to help make that possible.
• The Vermont legislature introduced a bill that would allow people to pay their taxes in cryptocurrencies. As clients start to ask about the use and tax treatment of digital funds, CPA firms will need to look to states for guidance on the issue.

Blockchain is the underlying technology that supports cryptocurrency. However, it also has many more functions. It is a decentralized, transparent public ledger where individuals can share information without having to trust a third party to verify the information. Multiple people can access copies of the ledger simultaneously, allowing transactions such as contracts to be recorded and verified without a principal authority.

This could be revolutionary for the CPA profession because the blockchain can record all parts of a transaction in real time from multiple sources, helping reduce errors. Once records are submitted on the blockchain, they cannot be altered, even by the records’ owner, providing transactions a high level of security. 

Given the disruptive power of these technologies, the AICPA will continue to monitor legislation across the country. CPA firms already using the technology should be mindful of the legislative and regulatory environment in their state, and closely monitor for state governments and businesses moving services and records onto the blockchain.