By David Drake
Cryptocurrencies have captured the attention of a growing number of companies and institutions. The Dutch audit firm, KPMG, is among the latest firms to focus on cryptocurrencies. As one of the leading four global audit firms, KPMG launched a report that clearly shows digital assets are worth considering, but insist that institutionalization is key to their success.
The utilization of blockchain and token transactions made KPMG believe that the tokenization will shape the global economy moving forward. For KPMG experts, tokenization will be one of the most impactful innovations powered by cryptocurrencies in the coming years. According to the report, digital currencies are capable of revolutionizing the financial sector by creating an open system.
The Big Question
Such a system would be free of centralized control, provide wide access to financial resources as well as affordable and faster payment solutions that connect people anywhere. Acknowledging that this can only happen if institutional capital flows into the cryptocurrency space, the KPMG report raises questions on what role industry player and government should play in facilitating this.
BlockCommerce CEO, Bill Papacharalampous, believes that to achieve stability and convince both governments and industry players that cryptocurrencies are indeed the next step to a free, and at the same time more secure and stable way to transact on daily basis, the question that we must focus on is ‘what can we do to help governments and industry players in order to attract institutional capital to the cryptocurrency space?’
He says, “In my opinion, three things are critical – Mass adoption through daily consumer use, provision of background infrastructure to support a true FIAT to Crypto Bridge so as to allow retailers to experience the additional functionality and benefits of cryptocurrency while offering consumers the type of interaction they have come to expect, and innovative technology that decentralizes the entire supply chain through the creation of the world’s first unified eCommerce ecosystem.”
The KPMG report shows that digital assets will grow if there is a shift from the current speculation phase. But beyond this, the path to getting institutional capital to the cryptocurrency industry faces several challenges that governments need to address together with industry players.
These challenges include developing a harmonised global regulatory framework for digital assets to enhance regulatory compliance. There is also a need to develop cyber security standards to address the security challenges facing cryptocurrency transactions, while the need to relook the accounting and tax implications of crypto assets must also be addressed. This, because the industry requires a harmonised accounting approach for recording digital assets in the books of accounts as well as tax reporting.
At the same time, cryptocurrency forks need to be governed better because division of a single blockchain requires clear guidelines for managing the tax, financial, operational and accounting implications that come with such actions. Government and industry players also need to focus on fraud and theft prevention. One of the ways to achieve this is for these two players to establish the minimum amount of information that should be provided to undertake cryptocurrency transactions.
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.