As Bitcoin and other cryptocurrencies become more prevalent in today’s world, many people predict they will replace cash in the near future. One of the main elements of accounting information systems is the collection of data regarding the activities of an organization. However, the use of Bitcoin, such as when gambling in an online casino, has raised many concerns, mainly a lack of transparency.
Bitcoin has become one of the most popular cryptocurrencies worldwide and has been seen as revolutionary by some money experts since it’s completely digital and not based on anything physical. Many see it as the currency of the future. Opposers argue that it’s a fraud that will lead to billions in losses when the financial bubble bursts. Research has recently shown that the use of Bitcoin is growing, but not as fast as some other alternatives.
Accounting information systems include many components that are equally vital for the system to function effectively, with Bitcoin use related to specific concerns in many of those areas. One of the problems is that it’s unclear how the asset should be classified or when it’s necessary to value it.
What Are The Challenges?
There are various regulations throughout the business world put in place to help eliminate illegal activities. Banks have multiple ways of ensuring that money is not linked to activities such as drug trafficking, terrorism, or any unlawful businesses. They must verify each customer’s identity, making it easier to determine where funds originate and where they are going.
When using Bitcoin, no verification exists, and authorities have no way of ensuring how transparent the transactions are as different criminal organizations abuse them.
One example of illegal activity is Silk Road, a marketplace to buy and sell narcotics and other illicit items. Customers from various countries use Bitcoin to buy and sell drugs and unlawful contraband. Illegal gambling is another activity benefitting from the use of Bitcoin.
Creating Use Cases
By using sophisticated software for transaction security, the identity of users and the origin of funds can be difficult and sometimes impossible to find. The viability of any new currency is only acceptable if more people want to use it. If the use of Bitcoin were limited to a small number of settings or used by only a small group of people, the currency would eventually cease to exist.
Since Bitcoin and other crypto are used to finance various illegal activities, their viability can sometimes be questioned. Although soon to likely be under regulation, many Bitcoin supporters are opposed and say they have a right to privacy and being free of regulation when using the cryptocurrency.
To ensure Bitcoin users are ethical when using it, procedures to verify the user’s identity should be put in place, with the user’s privacy being restricted. This will play a significant role in deterring terrorists, drug dealers, and other criminal organizations. The verification process would require the inclusion of identification documents and financial data within Bitcoin accounts and could even be the same processes used by reputable financial institutions.
For example, if a user’s Bitcoin wallet is linked to their bank account, some personal information should be visible to other users to see if a bank has verified them. To ensure the verification is anonymous and confidential, institutions could create a verification group made up of different banks. Users could see if another’s identity is verified in the system without their exact identity being revealed.
With the increased use of Bitcoin, many changes need to be made in accounting information systems. With the acknowledgment that many Bitcoins are used to fund various illegal activities, it’s important to develop some type of verification procedure. Bitcoin wallets may eventually be tied to the customer’s bank account to deter the use of cryptocurrency by criminal groups to fund illegal activity. This will add the transparency that is needed for all future Bitcoin transactions.