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KPMG’s report highlights that crypto assets have “huge potential,” but that institutionalization is needed in order for them to have trust and scale.
Despite the woes most digital currencies have faced in 2018, KPMG, one of the “Big Four” accounting firms, issued a report on November 15 highlighting the potential cryptoassets have.
Called the “Institutionalization of Cryptoassets,” the firm says that digital assets have huge potential to “revolutionize the financial sector” — but not without interest from institutional investors.
While the report is bullish towards digital assets, it also highlights the struggles and challenges cryptocurrencies face in terms of adoption in the global financial services ecosystem.
“Cryptoassets have potential. But for them to realize this potential, institutionalization is needed,” the report’s foreword says. KPMG says institutionalization is the “at-scale participation” in the crypto world of banks, broker dealers, exchanges, payment providers, financial technology and other areas in the global financial services ecosystem. “We believe this is a necessary next step for crypto to crate trust and scale.”
While the firm says that cryptoassets are a “big deal” and “worth paying attention to,” KPMG acknowledges that the industry has also been prone to good and bad press.
“In 2018, we are seeing a wave of new entrants in the market such as security token platforms, stablecoins, and even established financial services institutions that are launching crypto products and services. Cryptoassets are now impossible to ignore,” the report reads.
As a result of the growth of cryptoassets, this is why KPMG argues that institutionalization is key. Still, the firm highlights challenges institutionalization of cryptos face. Some of those difficulties include: compliance with regulatory obligations, fork management and governance, KYC and cryptoasset provenance, securing cryptoassets, accounting and financial report, and tax implications.
Despite these roadblocks, KPMG sees the potential cryptoassets have moving forward.
“Cryptoassets are worth paying attention to as they have the potential to revolutionize the global financial ecosystem,” the report says. “Institutionalization is the necessary next step for crypto and is required to build trust, facilitate scale, increase accessibility, and drive growth.”
The report concludes that while new tokens and assets are one thing, business models and market participants will significantly reshape the industry over the coming years.
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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.