Major Factor Hindering Crypto Industry Growth According to KPMG
One of the top global consultancy firms has put out a caveat on what has been hindering the growth of the cryptocurrency market as the sought institutional investment seems not forthcoming despite crypto competitors have been expanding their service offerings in innovative ways.
KPMG notes in its Cracking crypto custody that the lack of ways to secure digital assets has been a major factor keeping institutional investors away from contributing to the industry growth.
The firm points out the need to improve on the custody issue to avoid cases of hacks that have cost the industry about $10 bln since 2017 and to stop their compliance failures that have deprived many crypto businesses of the licenses they need to operate optimally.
“We believe crypto custody capabilities founded on four key building blocks will be best positioned to meet institutional needs and seize the incredible opportunity in the custody space,” it states as it proffers four key actions to build a sustainable business model in the emerging financial ecosystem.
They are next-gen security and resilience that will aim to provide layered defenses aligned to industry-standard frameworks and develop the technical operational agility to quickly embrace new innovations; and comprehensive compliance to meet existing financial regulations, compliance requirements, and customer commitments. Others are ensuring third-party including seeking out independent auditors to help prepare for and execute third-party attestation and certification requirements; and developing a value-added custody strategy to efficiently integrate front, middle and back office services into crypto custody capabilities.
The report comes as the space is looking to the likely effect of the block reward halving slated for May – with some already pointing at a positive outlook that it could be last time its impact would be predicted. Momentum has started building as a result and predictions on what could become of the industry have started flying around.
Along the line comes the lifting on the ban on crypto-related activities in India following a Supreme Court’s ruling overriding a previous directive put in place for banks not to involve in such activities by the country’s apex bank, the Reserve Bank of India (RBI). This led several crypto exchanges to cut down on their operation in India while most of them shut down completely.
If historical precedent is anything to follow, these two developments have the tendency to transform the industry considering their likely ripple effect on a global scale. The block halving cuts the supply of the top cryptocurrency into two leaving demand, if it remains the same, to chase less supply.
India, on the other hand, is a huge market for cryptocurrencies considering the population’s flair for technology and the economic growth picking up in the country of late. It shares some factors with China with regards to population, mobile payment uptake and market size. India has also been a darling of tech giants which explains why Facebook chose it for its proposed Libra introduction and the likes of TikTok is able to rise fast to over 200 mln users following its launch.
When put side by side with the chorused “China ban Bitcoin” meme, the recent lifting of the ban in India differs in many ways to what is obtainable in China. Unlike, China, India is not a crypto powerhouse where – not just for Bitcoin – a whole lot of crypto projects have sprung up in the country to gain global recognition. Rather, India is more of a country of crypto enthusiasts and users who are willing to see the industry’s base grow to potentially inspire the development of related projects with time.
As adoption increases, KPMG believes the need to develop a suite of core capabilities will help support institutional requirements and help keep an eye on future revenue growth opportunities as custody is one of the essential elements in building the successful tokenization of traditional assets, and for the institutionalization of cryptoassets to become reality.