InFocus

Digital Assets
Does the Perception Match Reality?

By Eric E. Cohen and Anthony Vinci

In Brief
Bitcoin and other digital assets have been prominently featured in the financial news and
popular press, to the point where many individual may feel familiar with what they are.
This perception, however, may not match the reality. The authors dispel some of the com-
mon misconceptions about digital assets and provide a starting point for CPAs to better
understand the impact of the new digital asset ecosystem on the accounting profession.

A
ccording to the U.S. Federal Trade
Commission (FTC), there has been a
huge spike in cryptocurrency invest-
ment scams (Consumer Protection
Data Spotlight, https://bit.ly/3puCx-
IF). CBS News notes that “as the popularity—and
price—of Bitcoin, Dogecoin and Ethereum continue
to rise, so too do the online scams associated with
those digital currencies [https://cbsn.ws/3vaArz3]”.
In the authors’ experience studying blockchain and
digital assets, such as Bitcoin and Ethereum, they
have found recurring statements in publications
aimed at the accounting profession that are inaccu-
rate or, at a minimum, oversimplified to the point
of misstatement. This article will discuss some
common misperceptions about digital assets, and
how they may impact businesses and investors.
In this article, the authors follow the AICPA and
NYSSCPA Digital Assets Committee’s convention
of referring to Bitcoin and its successors as “digital
assets.” The IRS uses the term “virtual currencies”;
the SEC uses “digital assets,” cryptocurrencies, vir-
tual currencies, and other various terms somewhat
interchangeably.
Background
Bitcoin and Ethereum are not the only digi-
tal assets, although Bitcoin is arguably the most
successful, with Ethereum currently second in
market capitalization; other assets have risen into
the top five and fallen over time. There are ser-
vices monitoring 7,000 (Coingecko.com), 9,800
(CoinMarketCap.com), or even 270,000 other coins
and tokens (Cryptosheets.com), as well as digital
collectibles. Many of the teams and supporters
behind these alternatives claim their digital asset is
better than Bitcoin or Ethereum, either for specific
utilities or generally as a cryptocurrency. In fact,
some of the leading competitors even have Bitcoin,
or some variation, in their name, or claim to be “the
real Bitcoin,” while alternates with Ethereum in
their names have also hit the news.
Bitcoin, perhaps the best-known digital asset,
recently blasted through its two-year-old “all-time
high” to set new records for price and for “mar-
ket cap.” On April 22, 2021, coinmarketcap.com
showed Bitcoin’s total market value of its circulated
supply to be over $1 trillion, more than three times
the next largest cryptocurrency (Ethereum); on May
18, the same resource showed Bitcoin having fallen
to $810 billion and Ethereum rising to almost half
Bitcoin’s market cap, at $399 billion. Market cap is
a measure of the relative size of a cryptocurrency,
calculated by multiplying the current market price
of a coin or token with the total number of coins
in circulation. With that forward momentum, along
with major mainstream companies making major
Bitcoin bets, investors and speculators who have
waited for the right moment to purchase Bitcoin are
now experiencing “fear of missing out,” or FOMO,
as proponents claim Bitcoin is destined to continue
to skyrocket in price and perhaps even replace tra-

30 JUNE/JULY 2021 | THE CPA JOURNAL

02_06_07-2021 Infocus-Cohen.indd 30 7/8/21 12:43 PM