Enabling Blockchain AR & AP

Blockchain technology is an emerging technology that is providing challenges and opportunities within the field of corporate accounting. According to Deloitte’s Global Blockchain Survey, one of the leading applications of interest for the use-cases for blockchain technology within an organization is payment processing.

Furthermore, Dr. Sean Stein Smith DBA, CPA , share’s insights, in his most recent Forbe’s article dated October 5th 2024, regarding how PayPal has launched their own stable token (PYUSD) to help businesses facilitate on-chain payments as well as allowing their merchant corporate customers to buy, sell, and hold crypto directly from their merchant wallets (Stein 2024).

All necessary activities and infrastructure involved to facilitate payments using the blockchain, businesses must have a digital wallet to receive, send, and hold custody their digital assets. Furthermore, there must be a network of businesses that have a digital wallet to facilitate mass adoption.

Dr. Stein Smith continues stating that PayPal is certainly well-positioned to bring blockchain technology to the masses, “with over 400 million customers worldwide and 36 million merchant accounts these developments and investments are positioned to drive significant adoption of crypto-for-payments moving forward” (Stein 2024).

However, merchants need to understand the regulatory accounting and tax requirements associated with facilitating transactions on the blockchain before accepting crypto as a valid payment option for their customers.

Businesses should consider speaking with a licensed tax or accounting professional that understands the reporting requirements associated with the corporate use of digital assets. “Even for stablecoins, whose sole purpose are to be used as a medium of exchange, the tax liability and reporting purposes remains exactly the same as for cryptocurrencies such as bitcoin. Adding to this complication are tax changes that are going to be rolled out connected to IRS Code Sections 6045 and 6050I.” (Stein 2024).

Companies must weigh the benefits associated with blockchain payments to the risks involved, such as accurately applying new and emerging regulatory requirements, before facilitating payments on-chain in addition to making sure they keep their financial statements up-to-date due to the acquisition or disposal of digital assets.

Either way, it appears that PayPal is certainly enabling businesses to have the option of facilitating AR & AP activities on the blockchain instead of more traditional methods of collecting revenue from customers or paying bills to vendors, such as using a credit card or electronic check.

It's also worth mentioning, for businesses that are interested in accepting payments on-chain or paying bills using the blockchain, it is recommended that they have the proper back-office accounting infrastructure to properly maintain compliance within their jurisdiction and keep their financial statements up-to-date based on their digital asset transactions.

Bitwave is one of the leading subledgers in the market that can help automate the process of matching invoices to inbound crypto payments received, as well as bills to outbound transactions. The subledger can help facilitate entries into a general ledger (such as Quickbooks, Xero, Sage Intact, or Netsuite) in order to properly account for revenue and expenses. Moreover, Bitwave provides the accurate gain / loss calculations on the per-wallet inventory level associated with the disposal for digital assets, along with Fair Market Value calculations.

Sources:

Deloitte's 2021 Global Blockchain Survey. Online. https://www2.deloitte.com/us/en/insights/topics/understanding-blockchain-potential/global-blockchain-survey.html

Smith, Sean S. (2024, October 5). PayPal’s investments are leading the mass adoption of crypto payments. Forbes. https://www.forbes.com/sites/digital-assets/2024/10/05/paypals-investments-are-leading-the-mass-adoption-of-crypto-payments/

Warfield, Donald E. Kieso, Jerry J. Weygandt, Terry D. Intermediate Accounting. Available from: MBS Direct, (18th Edition). Wiley Global Education US, 2022.