Internal control best practices for blockchain technology | Article

The Accounting Blockchain Coalition, made up of a group of accounting and tax professionals, was established last year to educate the accounting profession on digital assets and distributed ledger technology, including blockchain, and its accounting and audit implications. Recently, the coalition’s Internal Control Working Group released its first framework, providing guidance on how to mitigate the threats and vulnerabilities of digital assets and blockchain technology.

“The purpose of this document is to assist readers who are considering a risk assessment of certain common processes associated with the use of blockchain technology,” Bennett Moore, co-chair of the Internal Control Working Group, said during a recent Webinar. It is not intended to be an authoritative risk framework. The framework was adapted using concepts and principles from the National Institute of Standards and Technology’s (NIST) Special Publication 800-30.

At a high level, the type of inherent risks common to the various types of blockchain technologies are collusion, lack of authorization, hacks and malware, IT security practices, and a strong reliance on third-party platforms—whether associated with the use of cryptocurrencies, wallets, stablecoins, privacy coins, and more.

Below, we take a deeper dive into some of the various blockchain technologies highlighted in the framework, as well as a discussion about some of the inherent risks, threats and vulnerabilities, and internal control best practices for each.

“The purpose of this document is to assist readers who are considering a risk assessment of certain common processes associated with the use of blockchain technology.”

Bennett Moore, Co-chair, Internal Control Working Group

Stablecoins

Stablecoins are cryptocurrencies designed to be pegged to an asset that has a stable value, such as the U.S. dollar (fiat stablecoins) or to the price of a precious metal, like gold or silver. Fiat stablecoins, for example, are…

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