Accounting for digital currencies: A review of challenges and standardization efforts

Abstract

In the wake of the Fourth Industrial Revolution, the ascent of digital currencies heralds a transformative era in the global financial landscape, challenging traditional paradigms of currency, commerce, and regulation. This study delves into the emergence, integration, and implications of digital currencies within the global economy, with a particular focus on the accounting and regulatory challenges they pose. Through a meticulous examination of global adoption trends, technological advancements, and the historical evolution of digital currencies, this paper aims to dissect the multifaceted impact of these novel financial instruments on financial reporting, transparency, and regulatory frameworks. Employing a qualitative literature review strategy alongside thematic analysis, the study identifies key challenges in volatility, valuation, transaction anonymity, and the pressing need for standardized accounting practices to enhance comparability and transparency in financial reporting. The investigation extends to the scrutiny of current accounting standards, regulatory responses, and the concerted efforts towards standardization and best practices in digital currency accounting. The findings underscore a critical juncture for practitioners and regulators alike, navigating the intricate accounting landscape shaped by digital currencies. The study culminates in advocating for adaptive regulatory frameworks and standardized accounting practices, emphasizing the necessity of international collaboration and continuous research to harness the potential of digital currencies while safeguarding financial stability and integrity. Recommendations for future research and policy development are proposed to address the evolving dynamics of digital currencies, aiming to support innovation, ensure financial transparency, and maintain regulatory efficacy in the digital age.