Banks May Have “A Limited Shelf Life,” And Cannot “Afford to Miss” This Crypto Moment: KPMG Report

The report says crypto has “tremendous growth potential” for banks while covering DeFi’s “transformative potential.”


Crypto asset adoption is moving from the fringes of finance to the largest and most venerable trade centers in the world, states KPMG in its latest research paper. “Banks cannot afford to miss the moment.”

The paper talks about how the adoption of crypto assets will transform banking with insights from data provider Coin Metrics and BitGo, a digital asset compliance and custody provider.

According to KPMG, the growing acceptance of crypto assets, the rapid advancement of tech, and at-scale participation of financial institutions in the crypto market have changed how banks compete in the digital world forever.

Talking about its benefits, the paper states that cryptocurrencies help create a more open financial system, remove intermediaries, fees, and other roadblocks, and provide increased transparency throughout the asset lifecycle. Sal Ternullo, Director, One Americas Blockchain & Cryptoassets, KPMG said,

“Delivering benefits of trust, transparency, and auditability, cryptoasset adoption continues to rise among both retail and institutional investors. As crypto goes mainstream, it is paving the way for massive innovation in the banking sector, including new products and services with significant future growth potential.”

Mainstream Adoption

This mainstream adoption is the result of increased regulatory clarity, increasing acceptance of stablecoins and CBDC's, and a robust ecosystem of commerce centered around crypto-assets.

Growing interest among investors is another factor, particularly institutions that too in the US, as reflected in the Bitcoin price movement, which has been “strongly correlated” to US market hours since Nov. 2020 compared to 217 when it was largely retail-driven.

Growth can also be seen in crypto-asset market economic activity as Bitcoin transfers $8 billion on a daily basis, more than three times of early 2020 levels.

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Tremendous Growth Potential

Crypto products and services are also demonstrating “tremendous growth potential in the banking sector.” Banks that successfully service crypto-asset businesses and investors will likely have a competitive advantage in the future says the report.

However, bank operations need to evolve to meet crypto-asset owners' needs through seamless customer experience, modernized custody models, reporting and auditing capabilities, integrating public blockchain data with internal data, next-level cybersecurity industry-standard risk management and controls, and robust regulatory compliance.

Prime brokerage services, yield generation that involves crypto borrowing, lending, and staking, and payments are the four promising areas of crypto innovation, it states.

DeFi’s Transformative Potential

Yield generation has proven to be a critical value-added service layer for participants who have taken investment positions with long horizons, and as greater numbers of retail investors pursue yield-generation opportunities, those developing borrowing and lending solutions are poised for significant growth.

“While the regulatory dynamics around DeFi remain uncertain, the transformative potential of this new segment is just starting to be realized.”

According to the KPMG report, at the pace crypto markets are evolving, banks might have “a limited shelf life.” For this, they recommend both building and buying technology and tracking the growth trends to determine where they exactly want to play. With stress on scalability, the report further recommends tracking and adjusting to the regulatory climate.

“Growing participation in the crypto economy is making new crypto capabilities essential foundations for the bank of the future.”

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