With the advent of cryptocurrencies, Ernst & Young (EY) intends to eventually issue its own virtual token, the accounting firm’s managing partner in Israel, Yoram Tietz, told Calcalist in an interview earlier this month
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“The day is not far off when EY will offer its own digital coin,” said Mr. Tietz, who helps lead a global EY team that has been assembled in order to study and implement technologies based on blockchain architecture.
Mr. Tietz said blockchain technology, the public ledger technology that governs cryptocurrencies, allows transactions to be tracked and verified without the need for costly middlemen.
“The technology is transparent, safe and, most importantly, cheap compared to existing technologies,” Mr. Tietz said.
With 250,000 workers in offices worldwide EY is one of the “Big Four” accounting firms (along with Deloitte, PwC and KPMG). In order to audit the mountains of financial data produced by their customers, the accounting firms deploy convoluted software, statistical analysis, and highly skilled employees.
Mr. Teitz said he believes the Big Four will one day issue a common cryptocurrency with the aim of “making the auditing process more efficient.”
“The moment I make a transaction on the blockchain, I can say definitively that the deal has happened,” Mr. Teitz said. “I have no need to check if the merchandise was delivered, and I don’t have to check my bank account to see if the money was transferred. The audit will be assimilated into the transaction itself.”
Q: In the near future, will auditors no longer be necessary?
A: They’ll still be necessary but the process of auditing will be different. They will have to verify the validity of a process that includes blockchain-based systems—and that will require technological knowledge in addition to accounting knowledge.
I believe that in only a few years, 20% of the workforce involved in auditing financial reports will be tech people. Today the percentage is a little less than 7%.
Q: What is the wider significance of the technology and what is holding it back?
I believe it’s a revolution that should interest everyone—it’s going to impact every aspect of our lives, just as the internet did.
Say I buy a stock today. From the moment of purchase until it’s in my account, three business days will have passed. Why? Because the transaction involves mediators like banks, the stock exchange, and various clearing houses that verify its legitimacy. In a digital world based on the blockchain, the transfer of goods and the collection of payments will be direct and immediate. The savings on fees and time will be immense.
But in order for blockchain to become what I am envisioning, a number of things must happen, the most important of which is regulation and that will eventually come. When you look at the regulators in the Western world, you can see that they mean to legalize the technology, not hold it back. Swiss regulators are a good example because every few months, they adjust the regulation to match what’s happening in the industry.
Q: Will bitcoin maintain its reign?
There’s something nice about bitcoin and what’s happening around it, but if the U.S. government decided tomorrow to issue a virtual dollar, you can guess what the leading crypto token in the world would be.
Q: What do you think about initial coin offerings (ICOs)?
Despite the concerns of regulators about this method of fundraising, I think it’s legitimate and should be allowed. The basic idea of an ICO is the issuing of a token that is used as part of the company’s ordinary course of business, which creates a link between the worth of the token and the value created by the company. The problem today is that there’s a lot of money in the market and the enthusiasm is at its peak, and there are companies taking advantage of the moment by offering cryptocurrency without having any business activity.