Blockchain

What it means

A blockchain is a database kept not by one administrator but by many computers at once. Records are stored in blocks, each containing a fingerprint of the previous one, so changing an old record would show up immediately across the whole chain. Recorded transactions are therefore regarded as practically unchangeable.

The best-known use is cryptocurrencies and tokens, which Slovak law classes as virtual currencies. But blockchains are also used to trace supply chains, verify diplomas and certificates, and run so-called smart contracts that execute themselves once a condition is met.

For an ordinary company a blockchain replaces neither the books nor a database. It is slower and more expensive, and it makes sense where several parties do not trust each other and want no common administrator. For most internal tasks a normal database with a good audit log is enough.

How it works in practice

When a client pays or accepts cryptocurrency, the questions are mainly valuation and tax. A virtual currency is valued in the books under the rules for assets, and exchanging it for goods, services or another currency gives rise to taxable income or a loss that has to be recorded as of the transaction date.

A key record is the transaction statement from the exchange or wallet showing dates, amounts and rates. Without it the acquisition cost cannot be proven, and at an audit the whole income may be taxed with no costs set against it. We recommend archiving statements as you go, not just when filing the return.

Crypto-asset service providers are subject to MiCA and anti-money-laundering rules. A company working with them should expect KYC checks, questions on the source of funds and sometimes a refusal to accept payment from an unverified wallet.

What to watch out for

Immutability has a flip side: a payment sent to the wrong address cannot be recalled, and a lost key means losing access to the assets. A company that holds crypto needs clear rules on who has access to the keys and how they are backed up.

Be wary too of projects that use the word blockchain as marketing. Investing in a token without a clear issuer and rights can be a problem in the bank’s AML checks and at worst turn out to be fraud. Before a company invests, we advise vetting the issuer like any other partner.