CRYPTOCURRENCY, BLOCKCHAIN AND CRYPTO PAYMENTS

Chris: Alright! Hello everybody, thank you for taking some time out this Thursday afternoon. It's exciting to have a special guest with us today on #BKOT 29. As we roll along into February, this year's off to a good start and I have with me, Dr. Sean Stein Smith, the founder of the Institute for Blockchain and Crypto Asset Research. So we got connected from a congratulations email when I sent out 40 under 40 recognized by CPA Practice Advisor.

Dr. Sean: Yes sir, thank you for that by the way.

Chris:  Yes, awesome to have you here. So tell us about Dr. Smith here.

Dr. Sean: Sure, so probably the most important place to actually start is at the beginning right. And so I am a CPA by training, education, and worked in the industry for about eight and a half years. And I guess around maybe 2016  probably the end of 2015, 2016 as I was doing my Ph.D. work. I heard about this Blockchain. At the time that was too busy that you do anything about it but then I guess starting in 2016 and then obviously in 2017 during that bull run of bitcoin and the whole space.

I got really more hands-on into it and so both in terms of my role in higher education lean in college right here, and at the institute that I actually just have up and running as of the back half of 2020 and then all of the writing the research consulting training that I do in blockchain and crypto-assets. What I try to do is to one educate and to help companies large and small and individuals who try to get a handle on how it works, what it is, and also more the appointment right now. The trends and sort of bigger picture, directions that are driving this whole area going forward.

Chris: Yeah, change is constant and this currency's been around for a decade or so it's not really prevalent but at the same time it's becoming more and more aware I mean there's been some recent volatility in that so can you explain like why and how that could happen?

Dr. Sean: Yeah sure, so to your point right. The whole idea of bitcoin and crypto has been around really since Halloween of 2008 when the original Bitcoin white paper got published and the first block was mine January 2009 so it's been in the ether right, for a while but in terms of being used as a currency it really hasn't caught it on yet. Because even though it's called cryptocurrency it’s currently not treated as a currency tool. 

Now to the whole conversation on the dramatic price volatility that has been going on especially at the tail end of 2020 during the holidays basically and the early part of 2021 all of that has a huge and a few main driving forces. 

• One is this feeling is this almost fear right that all of this quantitative easing money-printing both here in the U.S and overseas is going to ultimately have some sort of pushback right. There is ultimately going to be some hangover after all of this now obviously these actions right now are needed but there is going to be some sort of pushback on that and so there is this underlying sort of thought that bitcoin could serve as the 21st-century version of gold right basically being a hedge against inflation, dollar, weakness, all the rest.
• Two to sort of add on to that right now. All of us know that interest rates are at all-time lows right. This is awesome if you're a home buyer, car buyer trying to borrow money for a business. But if you're an investor right, be they individuals like us, be they large institutions, pensions, endowments, hedge funds which are the ultimate bad guy right now.  But any large institutional player has an obligation to try to get the best return possible but if the equity markets are overbought which could arguably be argued for and the debt markets are either yielding below zero or at zero, that then opens up the whole conversation on okay where is the actual cash flow going to go and so bitcoin has also been sort of captured in this whole push towards private equity stuff alternative asset and then crypto.

And then to sort of bringing us all the way up to right now this whole relatively recent movement of the Reddit retail trader has kind of captured and I know that's a whole other conversation right.

Chris: Oh yeah!

Dr. Sean: But all of that has also pushed. The rectus crypto is cool it's accessible it’s the hot topic and you can have a large impact on the price because there is nothing really backing that price in terms of a price to earnings, cash flows assets on the balance sheet so all of those factors do or have and do play a role in some of the ups and downs out there.

Chris: So now you talked a lot about what determines the value of it but also I mean for our audience to explain. You have stable coin bitcoin crypto right like what can you explain a little bit about the differences in that and how it all ties in?

Dr. Sean: Sure, so we have how long Chris 12 hours? but no, so overall right to your point Chris right there are over 4000 cryptocurrencies out there. Bitcoin, Dogecoin and a whole host of others but sort of broadly speaking there are basically three big areas right now there's the traditional decentralized crypto there's bitcoin ether right those are out there decentralized they aren't really managed by anybody right.

And so they float there's all that now there was this I guess starting in 2018 there's this whole rise of these privately issued coins right and they're called asset that coins stable coins whatever. And so all of those are kind of a halfway point between fiat and bitcoin right because they are cryptocurrencies but they're backed tethered, pegged, supported to an underlying asset, and the both of them right now are backed by the US dollar okay.

So then in theory each coin like the SSS coin backed on a one-to-one basis is equal to one US dollar on paper. And then over here starting in 2020 really this whole conversation around a central bank digital currency which is basically where now we have countries trying to get into the crypto game, trying to issue their own, trying to basically tokenize or try to put the dollar on a blockchain and so on. But from 2008 to 2020 right the whole conversation has gone a full 180 from bitcoin being open source no rules, no oversight, no banks or PayPal’s two in 2020. Now we have PayPal visa Mastercard encouraging their customers to buy and sell use bitcoin on their platforms and actual countries developing and in the case of mainland china actually rolling out their own crypto yuan hybrid.

Chris: Nice, yeah it’s going to evolve just like anything as I mentioned earlier change is constant.

Dr. Sean: Absolutely!

Chris: I mean do you think the ongoing pandemic has kind of moved this fast forward like it changed the mindset of this digital currency?

Dr. Sean: I would say so yes because if we go all the way back to march right. There was an idea or concept in the first draft of the care act it passed back in March, that actually included a clause or a phrase. I mean to actually have a blockchain-based system used to get economic aid payments out the door faster. 

Now ultimately it didn't work that way and there were all of those issues with the checks and the wrong folks getting them all the rest but even all the way back in March there was a real conversation going on. How do we move forward right, how do we move our payments, our finance system, our banking system out of the 20th and into the 21st-century paradigm? 

So yeah absolutely right because all of us are off-site from home doing more and more online PayPal had an I think a 72% uptick in their quarterly volume during the fourth quarter. So yeah absolutely this whole pivot to fully online or online first has definitely influenced and in a positive way blockchain crypto all the rest.

Chris: Yeah! it’s become more top of mind. I didn't realize that it was even in the cares accident it just makes sense right and even all when you go to we're both in New York City and when cash used to be king now it's all like apple pay or we accept wireless payments and everything like doesn't touch anything that type of deal but fair enough. So now talking about all the blockchain applications out there so where does someone start with that can you talk about what that is and some use cases with that?

Dr. Sean: Yup sure, and actually an excellent place to start so they get a big picture is Forbes. It publishes every year their Forbes 50 blockchain annual sort of listing of large billion dollar plus revenue companies. So big companies multinational ones usually have built their own blockchains or are part of someone else's blockchain and have those blockchains integrated into their business.

So a few of the examples and applications that are pretty high profile right now, Walmart has been pretty high profile since about 2017 or 2018 actually using their own leafy green blockchain to trace every single fresh food product sold at their stores.

IBM has the IBM food trust, IBM has a trade lens platform so for international shipping right trans-pacific transatlantic,  barges and cargo ships are all part or there are some of them that are part of this network to add traceability and transparency into the goods that are being shipped halfway around the world. 

And there are also some applications Volkswagen, Ford, FedEx ups there are also some applications being built out to help combat against conflict minerals, conflict minerals and also a really hot topic right now is, How do we use blockchain possibly to help track covid19 vaccines? 

Treatments from point A to point B to make sure that they're going to their correct endpoint then they're being handled correctly in terms of their time in the freezer defrosting and all of that. And so there's any number of applications out there are even online platforms for music streaming content streaming of all kinds built on a or augmented by a blockchain platform, so there is any number of applications out there but it's a lot bigger right than only payments just the main point.

Chris: Yeah! And it's so funny, you just made me think of something so I have this app called Cash app outright through square PayPal and so I got it because they always give discounts for buying products via their platform right so now they have a bitcoin feature and this is new that I noticed and so that one of their coupons is earned five percent worth of bitcoin for every any time that you shop and now I have invested twenty-one dollars Bitcoin without doing anything.

Dr. Sean: Nice! There we go, they're getting in there.

Chris: This just proves it proves to your point about this currency and how it's working our everyday lives and hey I owned a 21$ worth I mean it's amazing how easy it is and how to integrate and how it's coming for everyday lives, it just makes sense. So now for the accountant right you may not be too comfortable with this and not know where to start. What's some advice or some pointers you could give for them and that they could where they could help out their clients?

Dr. Sean: So probably the best place to start is to understand from an external client's point of view why they're interested in blockchain or in bitcoin or other cryptocurrencies right. Because not every company is ready for blockchain or bitcoin and not every single company is actually going to get the upside of blockchain or using cryptocurrencies. 

So after sort of having that sort of baseline conversation, why are you interested, and is there a business use case for it in your form right now. Then it's like okay fine how do we want to do this right do we want to build our own blockchain in-house? Do we want to take a model that's being used elsewhere and mean that bring it in-house or are we going to join somebody else's blockchain like at Walmart, JPMorgan, or some other large entity?

Now as far as the actual cryptocurrency side goes. What is the point of that? Are we going to get paid in bitcoin and crypto? Are we going to offer that as an option? or Are we going to go even further and say okay customers can pay us in crypto and to our suppliers and vendors we're going to pay you in bitcoin and other cryptocurrencies? So there are some different angles to have these conversations, but off the top, you have to be able to establish what type of actual blockchain is being talked about and then how the bitcoin or other cryptocurrency is ultimately going to be used in the firm.

Chris: Got it! It's good advice because as this continues to grow people need resources and know what to do, where to go and how to manage it per se. So now for the potential for the crypto blockchain to be used by enterprises, we talked about the different versions, now can you explain a little bit more about how that's going to and explain the future of this now and how that's going to tie into our everyday lives?

Dr. Sean: Sure, so probably the two best adjectives that I found to try to highlight some of the benefits are transparency and traceability right. So it's the ability now to be able to have access to every transaction as it's happening in real-time and to have those transactions confirmed by the members of that blockchain network. Because it's important to always have as a backdrop all that we are actually talking about here.

In terms of a blockchain, it's a network basically of members to store and to transfer data in an encrypted manner on a continuous basis. So as far as the upsides or as far as how it can be used for payments and so basically the biggest upside for an enterprise is the increased efficiency in its operations right because anybody who's ever worked in accounting for anything knows that trying to do confirmations, we're trying to get back up documentation, trying to audit entries, trying to pull entries, trying to do the invent counts of the inventory, trying to find out any tax outstanding issues and also just the time that all of that takes and the time and the energy that pulls away from the engagement itself and adding actual business value to our clients should be able to understand that having access to the information as it's actually being produced is a huge upside.

Chris: Awesome! Yes, l spot on with that some good information and I wanted to know more about you, recently you founded the Institute for Block chaining, Crypto Asset Research right. So where one made you start this and two what is the mission vision value for this?

Dr. Sean: Sure so I founded it really because I do a lot of work in the blockchain crypto asset space, I am on the boards of a few companies out there and have a column for Forbes. So I do a whole bunch of work out there but I do feel that there's still this sort of breakdown of these blockchain crypto conversations right into accounting audit tax transportation and then I.T. right. 

So how do we bring that all together right because there are countries out there that are doing an excellent job at trying to set up a blockchain policy, blockchain hubs, blockchain sandboxes, whereas here we haven't really connected all of these dots yet and obviously I can't do it all by myself? 

But having that conversation bringing in different people right from different industry sectors to have those conversations and to actually produce thought leadership and content analyzing blockchain right, from an end-to-end point of view it was really the underlying push and so than to that end really the whole mission of the institute is to be out there talk to policymakers, industry actors and hopefully people who are on the ground trying to get it up and running in their firm and to be able to have them come together. 

Hash out the open items of which there are many and then hopefully be able to start pushing this whole conversation outside of sort of how it works? Why should? I do it. What's the upside to trying to build that? okay fine here are the overarching guidelines, frameworks, and sort of thought landscape that should underpin the blockchain and broader crypto asset conversations.

Chris: Yeah! that's awesome seriously. Because resources are such a necessity and just like simple technology right with the pandemic came most in the accounting industry weren't even partially virtual right. I have worked at many virtual firms but if I had 10 calls one of them would be virtual right and so it's new so and you could love it or hate it but you gotta embrace it, that's the thing I mean I  have an iPhone 8 plus though it works that's why I keep it but even to get into the iPhone originally, I came from a blackberry so it was hard for me but I've just realized that technology's out there all these applications are out there you can love it or hate it but you just have to embrace it understand it.

And so yes you people like you folks like you are important to have as a resource to help us understand because it's not going anywhere. I mean it's getting a lot of ground. I am already a shareholder here.

Dr. Sean: Yeah absolutely! so creeping your point proving your point right here!

Chris: I  literally have about 350 apps on this phone. I just downloaded it. I would love if there's an app for it. I am that type of person so bringing you on today to give us some insight on this is really appreciate your time

Sean: Absolutely!

Chris: Any final thoughts or anything else for the audience today?

Sean: I would say really blockchain and crypto there are a ton of headlines out there right now. But the core points those keep in mind is that one it's a tool right it's software, hardware, and us and the best tool in the world isn't going to work as it should or operate as advertised. If the folks using it aren't educated and don't really understand why right it's being used in the first place. So ultimately right the I.T side of this conversation is important but it ultimately always is going to be us trying to explain to our colleagues and our external clients how to use it? Why use it and why it's important?

Chris: Yeah, absolutely! So I again appreciate your time coming on and explaining this to us and everyone out there, thank you for taking time out of your day to join us and we'll be back soon with some more content for you guys and ideas and all to help out the small the mid side of the county market. So #BKOT 29 coming to a close Dr. Sean Stein thank you so much again take care.

Sean: Absolutely, thank you so much, guys.

Chris: Bye!!

Entigrity™ is a trusted offshore staffing partner to over 500+ accountants, CPAs and tax firms across the US and Canada. Our flexible and transparent hiring model gives helps firms of all sizes to hire staff for accounting, bookkeeping, tax preparation or any other task for 75% less cost. As a firm 'run by accountants, for the accountants', Entigrity captures the hiring needs of accounting firms most precisely, providing staff that works directly under your control and management, still you are left with least to worry about compliance, payroll taxes, overheads or any other benefits.