Bitcoin and other cryptocurrencies have become the focus of special attention from a growing number of institutions and companies. One of the last to focus on the status of the crypto world is KPMG. Member of the Big Four group of accounting firms, KPMG has published a report stating that "the cryptoassets deserve attention", but the time has come to institutionalize them.
The KPMG analysts believe that the future of the economy is marked
The rapidly expanding uses of blockchain technology and token-based transactions have led KPMG experts to predict that they will reshape the global economy. The authors of the report believe that:
Although it is still in the early stages and it is difficult to predict how the next 10 years will unfold, the tokenised economy will probably be one of the most effective innovations allowed by cryptography.
The report also states that cryptocurrencies have the potential to revolutionize the financial world. Bitcoin, Ether and other blockchain-based currencies can create an open system with:
- No central control by an individual or group of institutions;
- Greater access to investment and the exchange of financial resources;
- Faster and cheaper payment solutions that connect people anywhere, anytime.
From speculation to institutionalization: the step forward
The KPMG analysts believe that all of the above will only happen if cryptotaxis will progress from the current phase, that of investment / speculation. Cryptocurrency developed for and in the retail market. The blockchain system makes direct transfers and the purchase of simple and direct goods.
The tokenised economy will probably be one of the most effective innovations allowed by cryptography.
However, the main institutions must adopt and recognize Bitcoin and other crptocurrencies, so that they become mainstream. As the authors of the report explain:
Cryptoassets have potential. But to realize this potential, institutionalization is necessary. Institutionalization is the large-scale participation in the encrypted market of banks, broker brokers, exchanges, payment service providers, fintech and other entities in the global financial services ecosystem. We believe this is a necessary next step in order for crypto to create trust and scalability.
This participation will help cryptocurrencies to take off, to adapt to global use and to reach the level of trust that people and organizations currently have in the major legal currencies. However, institutions have more requirements than the retail market to adopt cryptoassets. They need clear rules in terms of compliance, governance and transparency.
Key challenges on the path to institutionalize cryptography
The authors of the KPMG report recognize that their proposal is not easy to obtain. There are several problems that need to be resolved before the global economy can rely on cryptocurrencies.
Some of these challenges are:
- Regulatory compliance: creation of a global and harmonized regulatory framework for cryptoassets;
- Computer security problems: the development of a new IT security standard for encrypted transactions;
- Accounting, financial and tax implications: a harmonized approach to registering cryptoassets in accounting books and reporting them for tax purposes;
- Governance of the fork: when a single blockchain is divided into two chains, there must be clear rules for the management of the financial, fiscal, accounting and operational implications of this action;
- Determination of origin and property: determination of the minimum information required for cryptocurrency transactions to prevent theft and fraud.
We believe [institutionalisation] it is a next step needed for crypto to create trust and scalability.
The report analyzes various scenarios and potential solutions to these challenges. However, this is obviously a mental experiment and it will take a while before the global economy is ready to run on crypto. But every single effort made in this direction is a new piece added to the main blockchain. And institutional investors are definitely making a move.