Opportunities and Challenges of Using Blockchain Technology in Government Accounting in Brazil.
| Autor | Prux, Paula Raymundo |
| Cargo | Research Article |
INTRODUCTION
The convergence of administrative procedures and digital technologies in management systems marks the Fourth Industrial Revolution (Industry 4.0) (Schwab, 2016). The speed, reach, and impact of technology affect institutions in all countries, including the field of accounting. Industry 4.0 entails new operations and insights from accountants, who are discussing topics such as disruption, blockchain, compliance, and artificial intelligence (AI) (Rikhardsson & Yigitbasioglu, 2018). In Brazil, for example, the implementation of the Public Digital Bookkeeping System (SPED) by the country's federal revenue agency (RFB) has advanced the accounting sector. The system allows data cross-checking, integrates the accounting and tax information on taxes levied in different levels of government (federal, state, and local), rationalizes, standardizes, and consolidates accessory obligations, and improves the process of tax inspection (Sebold, Pi oner, Schappo, & Pioner, 2012).
Technology has led to changes in both government and business sectors, offering new management tools to improve access to information and transparency (Chahin, Cunha, Knight, & Pinto, 2004). It has contributed to accounting processes automation increasing productivity, efficiency, better customer service, information quality, and cost reduction (Ionescu, 2019; Lee & Tajudeen, 2020). Blockchain technology emerged amidst this context in 2008, characterized as a tool that ensures data reliability and security without the need for a central regulatory authority (Nakamoto, 2008; Tapscott & Tapscott, 2016). Its core features are encryption and the process of verifying the transactions until their registration, which makes the transaction safe and irreversible (Swan, 2015).
According to Talwar (2015), blockchain technology allows verifying each transaction, which could mean the end of random sampling. Thus, real-time auditing is possible since the transaction data is recorded in the blockchain ledger (Tapscott & Tapscott, 2016). Blockchain and artificial intelligence can transform fraud investigations and forensic accounting, issue alerts, and investigate unusual transactions as they occur (Talwar, 2015). Therefore, as highlighted by Moura, Brauner, and Janissek-Muniz (2020), the fact that blockchain can offer safe data storage and management contributes to making a case for its adoption in the public sector.
This study recognizes the potential of this technology to improve government accounting and considers the challenges of implementing projects using blockchain--lack of knowledge and use cases, low number of capable institutions and developers, and lack of encouragement from the public sector--as identified by Giongo and Balestro (2019). It proposes advancing the discussion about the use of blockchain technology by exploring the perception of Brazilian professionals working in the government. Thus, the research question guiding this study is: Considering the perspective of experts in technology and accounting in the public sector, what are the main opportunities and challenges of blockchain technology for government accounting?
Therefore, this work identifies the main opportunities and challenges of using blockchain in Brazilian government accounting. It observes the current context where the public sector seeks agility, quality, and accountability to administrative practices by resorting to smart and electronic government, using technology to organize public data (Melati & Janissek-Muniz, 2020). The volume of thousands of daily transactions in the Brazilian Integrated System of Federal Government Financial Administration (SIAFI), to mention only one of the systems in government accounting, is a crucial element in this context, requiring technologies for more transparency and quality of information. This study contributes to identify the perception of public actors about blockchain. The research addresses its potential to promote security in data storage and processing, information traceability, and government transparency (Kossow & Dykes, 2018), as well as avoiding data duplication, to generate information integrity, and to improve the workflow (Atzori, 2018), building policies that add public value (Scholl & Bolivar, 2019).
The research uses qualitative and quantitative data collected through a questionnaire with both open and close-ended questions, 19 in total. The non-probabilistic sample was composed of 94 professionals. The closed-ended questions were analyzed with descriptive statistics and the open-ended questions with content analysis.
This article is organized into five sections, including this introduction. The second section presents the concept of blockchain in the context of government accounting, followed by the methodology. The fourth section shows the results, and the last section offers the final considerations.
BLOCKCHAIN AND GOVERNMENT ACCOUNTING
The concepts and discussions presented in this section are based on a literature review of the databases BDTD/IBICT (Brazilian digital library of dissertations and theses of the Brazilian Institute of Information in Science and Technology), Periodicos Capes, and Google Scholar. The search was carried out from August 2018 to October 2019, using the keywords 'blockchain,' 'blockchain use cases,' 'blockchain accounting,' and 'blockchain public sector.' The selected literature is briefly presented below, describing the studies' objectives and conclusions.
The definition of blockchain by Wright and Filippi (2015) stands out. They describe it as a "distributed, shared, encrypted-database that serves as an irreversible and incorruptible public repository of information" (Wright & Filippi, 2015, p. 2.) The essence of this technology is how information is recorded. Each transaction originates a unique cryptographic key, created based on a code verification and validation network, which guarantees a safe transaction (Swan, 2015). The technical characteristics of this technology allow the expansion of information attributes such as data integrity and reliability and the establishment of validation mechanisms to reduce fraud and make accountability more precise and accessible (Nofer, Gomber, Hinz, & Schiereck, 2017; Zachariadis, Hileman, & Scott, 2019).
Blockchain can be structured into two major groups: public (permissionless) or private (permissioned) networks. Public networks have their own rules, and their operation does not depend on legal or regulatory aspects, while private networks are restricted to corporations--in this case, the blockchain network follows a specific regulation of pre-selected actors to participate (Formigoni, Braga, & Leal, 2017; Yermack, 2017). Thus, the cryptographic access keys for a blockchain categorize it as being a public or private network, since the wide access and anonymous keys are related to public networks, while the controlled keys (requesting permission for the registration of transactions) are related to the private blockchain network (Darlington, 2021).
Regardless of how blockchain is technologically structured, the application opportunities and its potential to redesign transactions and processes in business are outstanding (Cohen, Amoros, & Lundy, 2017; Swan, 2015). Blockchain can be used (beyond its application in cryptocurrency) to create smart contracts, register a variety of assets (stocks, real estate, vehicles, luxury handbags, works of art), and even "for public records such as real estate titles, birth certificates, driver's licenses, and university degrees" (Yermarck, 2017, p. 8). Therefore, blockchain is considered the new internet of business since its potential decentralization can affect the application of laws or their implementation and the governments, organizations, and society in general in their way of operating (Atzori, 2015; Wright & Filippi, 2015).
Giongo and Balestro (2019) approached the main characteristics of blockchain technology, addressing its impacts on accounting and finance. After carrying out exploratory research and interviewing three professionals, the authors observed that it was not yet possible to measure the scope of the technology. However, they concluded that blockchain potentially affects several areas, including finance and accounting, and stressed its application in the banking sector and its short-term impacts in auditing. Migliorini and Rocha (2019) researched how blockchain can be used within the accounting system, the level of acceptance of accounting professionals in the face of new technologies, and their perception regarding blockchain. Counting on a sample of 526 participants, the authors concluded that accounting professionals still have little knowledge about blockchain and cannot foresee the use of this technology in the field.
Biancolini, Silva, and Osti (2018) analyzed the possible uses of blockchain in public administration, mentioning several cases and pointing out positive and negative aspects. According to the authors, the technology is disruptive and can be widely used in the public sector, particularly in the areas of tax and compliance, increasing transparency, and reducing transaction costs. Bastos, Andujar, and Rode (2018) sought to identify the main impacts of blockchain as a tool for auditing, exploring its advantages and disadvantages in the face of future challenges regarding auditing practices. Based on systematic bibliographic research, the authors noticed an increase in the number of financial institutions using blockchain. Bastos et al. (2018) concluded that the characteristics of blockchain allow the implementation of continuous internal and external audits. They also point out a lack of regulation and legal environment in many countries. Dai and Vasarhelyi (2017) researched blockchain applications in accounting in order to discuss how this technology can support a real-time, verifiable, and transparent accounting ecosystem. The authors propose that...
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