"The technological possibilities and geographical boundaries are endless”: RSM on Blockchain

Blockchain can feel like a mind boggle, but businesses across industries and around the world are increasingly needing to understand it and realise how it can help them.

Embisa M’Peti, working from RSM’s office in Switzerland, is currently developing accounting services to work with middle market businesses that are focused on raising money through Initial Coin Offerings (ICOs). He is an expert in the blockchain technology underpinning ICOs so Accountancy Age caught up with him to find out about the practical element of this new innovation and how it is being implemented in the accountancy world.

M’Peti started by explaining that, currently, “Blockchain technology has much wider ramifications than just cryptocurrency. As we move into the future, we will see it disrupt the business world and our daily lives more and more.

“What we are seeing now is there is a lot of activity going on with companies adopting Blockchain technology. Companies who adopt it into their value chain, whether in the production process or delivery, use it as a way to record transactions in a decentralised manner through a network.”

How does it work?

M’Peti said that a lot of companies are adopting Blockchain technology by creating platforms through which they offer services where transactions can be recorded.

They fund these platforms through ICOs, creating their own currencies to raise the capital. This, in turn leads to the emergence of new companies and new business models.

Blockchain technology is revolutionary because of the way it operates. It cuts out the middle man and facilitates peer-to-peer interaction between the consumer and producer.

“That’s the novelty with the new technology that Blockchain offers,” M’Peti added.

He said: “Consumers are able to go directly, without an intermediary, as these have now become irrelevant in the modern world. This saves significant time and this is where the technology really brings value, as well as when it comes to security.”

The ins and outs of Blockchain are often where it gets confusing but, essentially, there are intelligent pieces of code which orchestrate relevant transactions. It’s an automated process and is all done, as explained, in the peer to peer mode.

For M’Peti, “The novelty with all this is the scale of it. The technological possibilities and geographical boundaries are endless. It’s happening on a planetary scale. Regulators are really struggling to handle it because it’s so new and so regulation needs to be adapted.”

What challenges must we navigate with Blockchain?

M’Peti said we must be realistic when it comes to adopting Blockchain. It’s very new and starting to make full use of it will unlikely be a completely smooth ride.

“There are certainly challenges which lie ahead, not only of a technical nature but also because there are dozens of blockchain technologies which all have different ways of orchestration.

“The problem with this is the information is decentralised. It’s decentralised ledger technology. Everyone is part of this network, maintaining the blockchain and ledger and so everyone has the possibility, depending on the transaction, of also having a say and confirming or declining that the transaction is correct. This is what’s known as the consensus mechanism.

“Scalability is also an issue because the amount of data we have is increasing exponentially and, at a certain point, this will bring limitations. Social, ethical, and security considerations must also come into the mix.”

These problems can be solved but it is an unprecedented technical challenge.

How do you get people on board?

M’Peti believes that “negative reaction to change has been the case with every new technology and blockchain is not alone in this. A lot of accountancy firms lost customers along the way when computers came in! Then again when cloud technology was introduced. It was very much questioned at the beginning but now it is more the norm.

“I think Blockchain is a sustainable change because it really brings some efficiencies which are currently existing and it solves a lot of problems. To make it more concrete it will need to become more user-led. It’s coming into the mainstream but there are still a lot of challenges.”

A lot has happened with Blockchain only in the last 12 months. There have been over 500 concrete Blockchain project globally, often produced by major corporates. Even banks have got on board, which is an interesting dynamic since Blockchain could be viewed as a threat by them, but they have seen how to use it to their benefit.

The main changes Blockchain will bring to accounting

Many accounting firms, whether small or large, will or already have adopted this technology to record information, providing they have the technology to do so.

M’Peti pointed out that “the pace of change is rapid. Intermediaries will be unnecessary sooner than 20 years. It will happen sooner than you think.”

When it comes to how Blockchain will change the accountancy jobs market, some roles will disappear while others will come into existence.

“Additional and new skillsets will be required,” M’Peti said, “Accountants will need to have a deeper understanding of new technology or at least be in the position to both orchestrate technology and provide advisory services.”

One observation is also that accountancy firms will start partnering with IT companies, acquiring them or buying into their skills.

“Any tasks of a repetitive nature will be replaced by technology – we have machines that are much faster and better at it than humans, not to mention the cost. In the long run it is a fraction on human resource.

“So it’s not all shiny but we should still see this as an opportunity. It’s not happening everywhere at the same speed, but the places it isn’t happening, they will catch up fast.”