Question

1. what are the main differences between stablecoins and other cryptocurrency.

2. How do you think stablecoins should be classified (intangible asset, currency equivalent, etc)?

3. Do you believe stablecoins have an important role to play in the world economy going forward?

4. What are some of the accounting issues you can predict with blockchain and cryptocurrencies?

Answer 1

Answer:
(1) The main differences between stablecoins and other cryptocurrency are:

Cryptos have shown tremendous market variations, both upward and downward, after its inception because of their high volatility. Back in 2017, when Bitcoin hit its all-time peak of $20,000, numerous traders and investors turned out to be millionaires instantly. However, in March 2020 the Black Thursday crypto market crashed, rendering some millionaires losing at least half of their fortune.

That's really the explanation for Stablecoins to emerge. Which is somewhat apparent from the name itself, Stablecoins are far less volatile than other cryptocurrencies. This digital asset is commonly used by daily traders because their values are constant, unlike many other cryptocurrencies, particularly Bitcoin, whose value can fluctuate at every given moment. Most traders prefer to sell their cryptocurrencies if they expect that their values would quickly collapse and then use that capital to invest in Stablecoins to prevent creating financial losses.

(2)
Cryptocurrencies can not be listed as "currency or cash equivalents" in the GAAP financial statements because they are not guaranteed by a governing power or are deemed to be legal tenders. They can not be listed as a tangible asset or an investment property because they are not a cash and do not signify a statutory right to obtain cash or any other financial instrument. Also, because cryptocurrencies are intangible, they do not explicitly follow the concept of inventory and cannot be classified as inventory on the balance sheet either. After going through the exclusion phase as described above, we are left with just one group to identify cryptocurrencies as intangible assets with an infinite existence. This is how many firms are actually classifying crypto properties in the GAAP financial system.

(3)
Yes, the Stablecoin represents a cryptographically verified digital asset documented on a blockchain, normally supported by a 'real-world' asset, such as fiat currency or commodity. These are meant to have market stability such that Stablecoin could be used as a digital value store and/or trading tool. Another of the main ways wherein Stablecoins may lead to a more sustainable global economy would be by tempering some of the possible challenges faced by the US dollar (USD) dominance of international foreign currency reserves. Foreign currency reserves are also accumulated by countries through commerce, and central banks play an important role in strengthening the value of their national currency. As per the IMF, the US dollar (USD) accounted for 62% of all foreign currency reserves retained by central banks during the first quarter of 2019, while the US GDP accounted for 15 % of global GDP.

(4)
Accounting issues with blockchain and cryptocurrencies are:
(a) Currency translation- Cryptocurrencies would have to be converted into an entity's operational currency in compliance with the criteria of IAS 21 'The Consequences of Changes in Foreign Exchange Rates.' As far as initial identification is concerned, this ensures that the cryptocurrency keeping would be reported through using the spot exchange rate between both the usable currency and the cryptocurrency at that point.

(b) Disclosure- Enterprises keeping cryptocurrency assets would need to comply with the disclosure provisions of either IAS 2 or IAS 38 as necessary. Provided that cryptocurrencies do not suit conveniently into the IFRS system, companies that need to consider extra reports in order to fulfill the ultimate purpose of IAS 1 'Presentation of Financial Statements,' which is to offer relevant information to consumers of the financial statements.

(c) Mining Issues- Cryptocurrency mining explains the mechanism by which transactions for different types of cryptocurrency are checked and applied to the distributed blockchain ledger. A variety of additional problems exist with companies that are cryptocurrencies 'mining.' Cryptocurrency miners use massive quantities of computational resources to solve blockchain algorithms. If a block has been resolved by the miner, they will, based on the mining algorithm, be entitled to 'transaction fees' as consideration for checking and accessing cryptocurrency transactions throughout the blockchain ledger.