What is Web3 and why does it matter to accountants?

With Web3 continuing to gain speed in both adoption and in focus by regulatory authorities, now is the time for accountants to consider their role in a decentralised virtual marketplace. New technology will certainly bring new opportunities to innovate in financial reporting and leverage blockchain for small business clients.

by | 4 Oct, 2024

Cobweb

Key points 

  • More than £190 billion of crypto assets were traded in the UK in 2022, with this market continuing to escalate rapidly.
  • As businesses continue to adopt blockchain for payments and smart contracts, new accounting frameworks and audit mechanisms must be developed.
  • Upskilling in this new, financial ecosystem can position accountants as trusted advisers able to help businesses leverage blockchain for clients.

The Web3 space continues to evolve rapidly in the UK, yet few people understand what it is and why it matters. Yet accountants would do well to understand this rapidly changing landscape as their clients wade into the Web3 waters that encompasses digital assets, tokenisation and other blockchain-enabled technology.

Web3 allows users to safely engage without intermediaries, driving innovations in decentralised finance, enabling peer-to-peer transactions, smart contracts, and the use of cryptocurrencies for secure financial exchanges.

In 2022, crypto assets worth £191 billion were traded in the UK, according to a report by Aria Babu, Senior Fellow for Technology and AI policy at the UK’s leading think-tank, Policy Exchange. She says E-commerce giants Shopify and Mercado Libre have already enabled crypto payments on their platforms, PayPal now facilitates stablecoin transactions, and JP Morgan has its own currency JPM Coin to optimise liquidity globally.

Babu’s report highlights how blockchain technology can be harnessed across a broad swathe of economic sectors and offers recommendations for the UK government. These include allowing stablecoin reserves to be placed at the Bank of England to promote a flourishing market and creating a tax wrapper for the exchange of crypto-assets to reduce customer burden and make it easier to be compliant.

The role of accountants in a decentralised market

Web3’s decentralised, open-source architecture has the potential to disrupt industries by creating true peer-to-peer business models, says accountant Electra Frost, a leading innovator in the blockchain space. “All of our core competency areas are being impacted by these converging crypto and AI technologies,” she says. 

Decentralisation presents accountants with new opportunities to explore innovative methods for asset valuation, capital allocation and financial reporting. Tokenisation, in particular, opens up new avenues for assigning value to assets, allocate capital or undertake financial reporting.

In the decentralised future world of Web3, accountants need to be able to trace transactions, consolidate data from various sources and apply accounting standards. However, they are likely to do so in a reinvented business world. 

A prime candidate for such reinvention is supply chain, says Gautam Jaggi, Director, Global Insights, Ernst and Young. This could be built on blockchain for security and inventory control and employ smart contracts to deal with suppliers and other third parties, he says.

A powerful example of this is IBM’s Food Trust platform that leverages blockchain to track food products across the supply chain, improving transparency and enabling faster recalls in the event of safety concerns, says Dr Hui Gong, Lecturer in Decentralised Finance and Blockchain at UCL Institute of Finance & Technology.

“Whether through DeFi (Decentralise Finance) solutions that reduce costs for financial institutions, or Web3 platforms offering new revenue streams via digital assets, blockchain is set to transform how businesses operate across a variety of industries,” he says.

Regulation to accelerate adoption and reduce risk

Adoption of new technologies must be accompanied by the evolution of regulatory frameworks and professional standards to mitigate the risks inherent in the decentralised nature of blockchain, says Dr Gong.

“Web3’s decentralised nature raises significant issues for regulatory bodies, particularly around AML (anti-money laundering) and CFT (countering the financing of terrorism) compliance,” he says. 

In September last year, the UK Parliament introduced a bill designed to clarify the legal status of cryptocurrencies. The move is expected to provide enhanced protection for tech-savvy owners of Bitcoin and other digital assets.

“The introduction of legislative frameworks by UK government, such as recognising digital assets as personal property, further accelerates adoption,” says Frost. “This legal clarity could make it easier for accountants to provide services to crypto businesses and individuals involved in the space.”

The government also intends to introduce a regime to regulate broader crypto asset activities, including issuance activities, payment activities, exchange activities, investment and risk management activities; lending, borrowing and leverage activities; safeguarding and/or administration activities; and validation and governance activities.

Internationally, global standards are being set by Financial Action Task Force, Basel Committee on Banking Supervision, Financial Stability Board, according to KPMG. 

Updating accounting frameworks

As businesses continue to adopt blockchain for payments and smart contracts, it is essential to develop new accounting frameworks and audit mechanisms to recognise and verify crypto assets, says Dr Gong.

“Finance professionals need to deepen their knowledge in areas such as smart contracts, blockchain fundamentals, and decentralise applications (dApps)—the foundational elements of Web3,” he says.

“Mastery of these concepts will not only enhance understanding but also enable professionals to apply Web3 innovations in practical, real-world scenarios. Staying informed on data analytics, cryptocurrency markets, and digital asset management is also essential, as these components are increasingly integral to modern financial ecosystems.”

Accountants operating audit firms will need to assess the value of digital assets, track transactions across decentralised networks, and ensure compliance with evolving regulations, says Dr Gong.

“Blockchain’s immutable ledger offers a reliable audit trail, providing an unalterable history of transactions, which can streamline cross-border audits and enable financial institutions to confidently adopt crypto without risking compliance failures.”

Frost’s newly established Bitcoin Global Competency Framework for Accountants is designed to map Bitcoin and blockchain concepts to IFAC’s International Education Standards (IES).

The aim is to guide the creation of targeted microcredentials, positioning public accountants as trusted advisers in a decentralised, digital asset economy.   

WEB3 as envisaged and supplied by University College of London

What is Web 1.0, 2.0 and 3.0?

Web 1.0

The earliest stage of the internet featured a small number of content creators sharing static web pages for a wide audience of passive readers. It was focused on information retrieval, where users primarily searched for and consumed data. 

Web 2.0

Web 2.0 saw the rise of interactive, user-generated content. Instead of just consuming information, users now create and share vast amounts of content. This era brought forth social media, collaboration tools, and online communities. Enhanced interactivity, ease of use, and compatibility across devices became key.

Web 3.0

Web 3.0 is centred on decentralisation, openness, and increased user empowerment. This phase shifts away from centralised platforms like Facebook and Google, favouring decentralised networks. It emphasises privacy, where users can engage without intermediaries, reducing risks. With technologies like blockchain, artificial intelligence, and machine learning, Web 3.0 drives innovations in decentralised finance, enabling peer-to-peer transactions, smart contracts, and the use of cryptocurrencies for secure financial exchanges.


The Institute of Financial Accountants will run a seminar on Crypto Fundamentals for the Accountancy Sector on October 14. The Web3 economy and opportunities for accountants will also be discussed at the IFA International Conference Online on Thursday, November 7, from 9am to 4pm. You can register now.

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