The House of Representatives passed a resolution to repeal the regulations that created reporting requirements for trading front-end service providers that work directly with users on digital asset transactions (colloquially known as DeFi brokers.) The 292-132 vote came shortly after the Senate approved its own bill on the matter by a vote of 70-27. 

DeFi systems, unlike traditional finance, do not use intermediaries like banks but instead operate in a peer-to-peer fashion using smart contracts, which are self-executing lines of computer code that automatically enforce the rules and conditions of an agreement between two or more parties, stored on a blockchain, a type of public digital ledger. The previous administration warned that illicit actors can launder their money through the DeFi ecosystem in a number of ways, such as using cross-chain bridges to transfer cryptocurrency from one blockchain to another, asset mixers that comingle the proceeds of criminal activities with legitimate money, or liquidity pools that provide fee income. The Treasury said that ransomware gangs in particular are fond of laundering their money through DeFi networks.

In general, the rule required decentralized finance platforms to report detailed information on customers to the IRS, starting in tax year 2027. Effectively, the rule would require DeFi brokers to file a Form 1099 and be subject to the same reporting rules as brokers for securities and operators of custodial digital asset trading platforms. The rule was designed to improve tax compliance and create parity with centralized crypto exchanges and stock brokerages. Those opposing the rule, though, said there were too many differences between DeFi brokers and traditional securities brokers for the rule to be practical — they are not centralized, do not collect the information needed to implement this rule, and do not act as a true third-party intermediary like more traditional securities brokers. They warned that the rule would hold major negative consequences for the crypto sector. 

On Dec. 27, 2024 the Treasury and the IRS issued final regulations on sales and exchanges of digital assets on the new Form 1099-DA for decentralized finance brokers, along with transition relief. The requirements for DeFi companies start on or after Jan. 1, 2027, two years later than the rules for centralized exchanges and platforms.

Lawmakers, mostly Republicans, objected not only to the rule itself but also to its 11th hour issuance. 

“Under President Biden, the IRS traded congressional intent for a politically motivated mandate,” said House Ways and Means Committee chairman Jason Smith, R-Missouri, in a statement. “The Biden administration made no secret of its opposition to digital assets and America’s leadership in this booming industry. Bureaucrats weaponized every tool in the toolbox, including finalizing this rule at the 11th hour, crippling the digital asset industry and threatening American leadership and innovation in the process. Approximately one in four Americans own cryptocurrency. This rule puts a huge burden on these regular folks and could discourage participation in the digital asset market altogether.”  

The joint resolution effectively repeals the rule submitted by the Treasury relating to “Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales.” It also paves the way for the current administration to apply its own rules. 

The news comes after another major crypto-related announcement: the establishment of a Strategic Bitcoin Reserve and a U.S. Digital Asset Stockpile. The reserve will treat Bitcoin, the first and most popular blockchain-based cryptocurrency, as a reserve asset. It will be capitalized with tokens owned by the Department of Treasury that were forfeited as part of criminal or civil asset forfeiture proceedings.

The U.S. Digital Asset Stockpile, meanwhile, will consist of digital assets other than bitcoin owned by the Department of Treasury that were forfeited in criminal or civil asset forfeiture proceedings. 

Bloomberg Tax and Accounting announced the release of two new generative AI-driven features meant to aid users in tax research.

The first is Bloomberg Tax Answers, which enables users to ask tax questions which the bot can then answer with supporting primary sources and expert analysis so that accountants can find, validate and apply this information to their workflows. It provides what Bloomberg said would be a brief but meaningful answer to a user’s search directly on top of regular search results, with no need to learn a new tool. Each answer generated includes citations and links to the Bloomberg Tax authorities and source documents used to generate it, including select primary and secondary sources such as the Internal Revenue Code, federal and state tax agency documents, state tax statutes and regulations, and Bloomberg Tax content. 

The second is AI Assistant, a chat-based research tool lets users ask specific questions from within a document, including Bloomberg Tax’s own portfolios, as well as create data visualizations that can compare tax information across jurisdictions. Users can also ask specific questions about the document to quickly identify the information they are looking for. 

“The latest AI-powered features for Bloomberg Tax & Accounting showcase our dedication to innovation and solving complex tax research challenges,” said Evan Croen, head of Bloomberg Tax. “Bloomberg Tax Answers and AI Assistant deliver rapid, accurate answers and facilitate cross-jurisdictional comparisons. Additionally, users can verify information with direct access to cited source documents, enhancing reliability and trustworthiness.”

Both solutions were initially released for select users in the new Bloomberg Tax Innovation Studio late last year (see previous story.) This was done not only to provide earlier access to features in development, it also served as a means to quickly get user feedback. The idea for the Innovation Studio was introduced by Bloomberg Industry Group in 2023 to prioritize incorporating customer feedback and iteration into the newest product concepts and ensure new tools meet demand and fit workflows.

Bloomberg Tax Answers and AI Assistant will be subject to ongoing refinement based on customer feedback. AI Assistant will be updated with additional research skills in the coming months. Both Bloomberg Tax Answers and AI Assistant are available within the Bloomberg Tax platform at no additional charge.

Imagine for a moment, you are the CEO or CRO of a growing fintech company when the news about how artificial intelligence can transform the accounting and finance industries first breaks.

The dollar signs start going off in your head, because you’re already perfectly positioned to be at the forefront of this upcoming boom.

You have the team, and you have the infrastructure, to capitalize on incorporating AI into your existing product offerings, which surely will excite the CFOs and controllers you sell to, making hitting your sales numbers automatic.

These controllers are desperate for technology to help their burnt out staff pick up the slack from the never-ending work that keeps piling onto their plates, and these CFOs are desperately trying to get it all done without incurring additional headcount costs, so they can report back to their board a decrease in cash burn.

Just when you think the opportunity can’t get any better, it does! The tech world announces AI agents, an iterative evolution of the original AI, which can quite literally do staff accounting work (and in some cases, one might argue it can even think at the same level of a staff – I kid! sorta). 

Your software engineers get to work implementing all of these new technologies and features into your product while you and leadership anxiously await the chance to inform the world of how you’re at the front edge of this time and cost-saving technological breakthrough!

Then, as you lay in bed the night before you’re about to make some major marketing campaign announcements, it hits you… as a fintech SaaS company, you sell seats. Your revenue numbers are tied to selling more seats of users on your application.

This dream very quickly became a nightmare.

Stuck between a rock and a hard place

If you missed it, the circular function resulting in a cell error in this situation (more accounting jokes), is that the technology being sold reduces the need for more people, and thus reduces cost… but in order for the company that is selling this technology to grow and report their exceeded sales benchmarks to the board, they need more purchased seats, which necessitates people to fill those seats!

The impasse is that the very thing which is going to help fintech products become better and more valuable to customers and users is also going to be the thing that reduces the number of customers and users.

Let’s also not forget about the optics.

Most accounting technology companies pride themselves on making life easier for the accountants whose work the technology is assisting with, but how much would these accountants want to buy the technology that could theoretically take their jobs?

You can see how this is a difficult situation, for fintech branding, yes; but also for us accountants to grapple with the idea that there is no winning either. We can either be left behind working inefficiently, or advance ourselves out of a job. 

That’s not to say there aren’t the lucky few who master the technology and get on top of it — because every system needs an operator — but why have a team of 10 when you can have a team of five?

To the CFO, this seems like a no brainer … and why wouldn’t the sales teams at fintech companies jump on the chance to appeal to the most critical part of this top level decision maker’s job: saving money.

It seems contradictory, since artificial intelligence is what has created the boom of B2B fintech SaaS companies over the last decade, starting with simple rules-based automations before AI was even a thing.

But as we all know, no opportunity is met without a challenge, and this one has been one brewing underneath all of the opportunities since technology first became the “LIFO the party” (OK, I seriously need to stop with these jokes).

So all doom, no boom?

It’s not all gray skies, as much as it sounds or appears like it may be.

The pivot point is clear and is part of a few other discussions that have been going around for years.

The first is the accounting profession rebrand, which I’ve written about before.

Technology offers us the chance to not just tell the next generation of accountants that their work won’t be as difficult and tedious because AI will help them, but rather that their work will be entirely different.

This may be met sorely by some ears who wish to preserve the traditional ways of working that accounting has been — trust me, I’ll always be a beautiful double entry purest — but we need to be comfortable understanding that beyond the technical theory, what it is that we as accountants do is going to be different.

When sprinklers were invented, gardeners and landscapers didn’t go out of business — they still needed to know where to place the sprinklers, at what interval they needed to turn on, and for how long — but they did need to give up trying to sell their traditional lawn-watering services.

We hate the word “change” in accounting because it sounds like more work, but sometimes change is necessary. Given we are referring to the talent pipeline as a “crisis” inherently means drastic times call for drastic changes.

The second has been the ongoing move to value-based pricing models.

This began when we started questioning if billable hours still made sense, with more work being outsourced and offshored for cheaper rates, and as technology made us more efficient with our work.

It left the room for a while, but the billable hours conversation is back up for discussion, and more importantly for action.

In the same way that fintech SaaS companies are struggling to find a solution to a seat-based pricing model, where AI reduces the number of seats needed; accounting firms are in need of finding a solution to billable hour-based charging, where AI reduces the number of hours needed.

As straightforward as it may sound to move to a “value-based” model, outcomes are not always necessarily the most quantifiable, and ROI has many more factors than the three words that make the acronym up.

Perhaps there’s an actuarial opportunity for roles that help provide clarity to how we place value on these types of activities, but that is a discussion for another day.

Within challenge comes opportunity

We can say that “accountants can do higher-level, more strategic work” all we want, but if accountants don’t view themselves as being more creative, innovative and strategic thinkers, it’ll be a tough service to sell. Plus, if the leadership at companies doesn’t view accountants beyond bookkeeping task rabbits, nor does the mainstream view accountants beyond their traditional number crunching stereotypes, it’ll be nearly impossible to swim against the tide.

What we, as accountants, have on our hands, is a need to show the world that we are capable of much more than what we’ve been pinned as, and most importantly to prove to ourselves that we can not only survive, but thrive in a different environment than SALY’s (OK, that was the last pun, I promise).

But that’s the rebrand hurdle that we’re up against. Not just among ourselves, but the entire business community, and most of society.

While each opportunity presents a new challenge, each challenge presents a new opportunity — so it’s time we start viewing them as such.