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Challenges when Auditing Cryptocurrencies

On Behalf of | Jul 29, 2022 | Cryptocurrency Issues & Audits

Cryptocurrency investments and holdings have become a trendy way for people and businesses in Georgia to explore new financial opportunities. However, auditing crypto has become a real challenge in a legally unprecedented area.

Auditing Crypto

Holding cryptocurrency is an action that a person or business might take for a variety of reasons. One of these is that they wish to treat the holdings as an investment, hoping that the value of the assets will grow or that their price path will act as a hedge to other investments. Other reasons might include a desire to use the cryptocurrency as an entry point into crypto-related business ventures, or as a method of transferring cash between units located in different countries.

Holding a significant amount of crypto can present an audit risk because the guidelines for how to audit crypto holdings are not clear. Their tax status and whether they are more like currencies or more like investments has changed from year to year, for example. Additionally, their value in dollars or other currency can be quite volatile, and their performance in their intended roles is likewise volatile. All of these aspects create considerable risk and uncertainty. A cryptocurrency audit can be surprising and problematic without the right preparations because the outcomes are hard to predict, and because rules for governing these assets change so frequently.

It is not easy to keep up with the regulations for crypto holdings, and the pressure of a possible audit raises the stakes for people as well as companies that want to get involved with some kind of crypto asset for themselves.