Maggie McGhee, director of professional insights at ACCA, said the association sought to highlight three dimensions giving cause for concern. One was the pseudonymous nature of cryptocurrencies, which meant while it was possible to identify the address a given payment goes to, it is not possible to confirm the identity of the underlying beneficiary.

‘This is an obvious risk for money laundering, terrorist financing and the funding of other types of illegal activities. Secondly, its high volatility makes it inherently risky and unstable. Thirdly, it is funding a speculative bubble in other areas like initial coin offerings (ICOs) with speculators chasing poorly formed business proposition,’ she said.

However, McGhee also noted that the underlying blockchain (distributed ledger) technology behind Bitcoin could revolutionise how financial transactions are done and have a positive impact on business globally, and said this potential must be viewed separately from the risks.

‘As new technologies become adopted, it is vital that professional accountants develop their digital understanding alongside their ethical responsibilities to flag areas of concern. In that context, ACCA supports a close relationship between regulators and the accountancy profession to ensure that a robust regulatory approach is crafted, and refined as developments emerge, so that it is fit-for-purpose in a digital age,’ she said.

Separately, corporate recovery and business advisory firm Quantuma and law firm Francis Wilks & Jones are calling for cryptocurrencies to be made subject to insolvency law, saying insolvency administrators seeking the recovery of assets must be legally empowered to scrutinise all data relating to Bitcoin transactions.

Chris Newell, a partner at Quantuma, said: ‘Governments have been slow to recognise the growing significance of cryptocurrency in financial transactions. 

‘Some coins such as Monero are designed to avoid tracking and the majority of exchanges where digital currency can be traded are registered outside the jurisdiction and have stringent privacy policies.

‘These cryptocurrency features could be exploited by more unscrupulous individuals as a means of hiding assets, and we hope this possible criminal element will be addressed in the regulatory overhaul promised by UK and EU governments.’

Newell argues there are benefits in a mechanism allowing trustees of a bankruptcy estate or office holders to access data relating to any transactions involving cryptocurrency in order to ultimately recover assets. This might involve office holders having the ability to make requests to Bitcoin exchanges or being able to access the Blockchain to interrogate transactions. 

‘Such access would immediately remove a lot of the negativity surrounding digital currency in that it would become transparent to parties who had a right to investigate and query transactions,’ he said.

Christopher Ahearne, an associate at Francis Wilks & Jones, said: ‘We expect there to be significant resistance to such a move, and it’s therefore likely that the costs to pursue and investigate these transactions will be high and potentially uneconomical.

‘For the foreseeable future office holders may have to rely on the full ongoing co-operation and assistance of a director in order to identify and liquidate digital currency.’

Ahearne pointed out that if this is not forthcoming, then legal proceedings may be required.

Report by Pat Sweet