KPMG Accounting Firm Releases ‘Institutionalization Of Crypto Assets’ Report, Talking About Bitcoin’s Arrival
KPMG Accounting Firm Believes That Crypto Assets Are Unprepared To Be Considered Real Currencies
KPMG is known as one of the “big four” accounting firms, so it is clear that they understand the world of traditional finance. However, in a recent article by TheNextWeb, it seems as though they do not have faith in cryptocurrencies, calling the use of Bitcoin as a store of value a “fool’s errand.” Furthermore, they allege that these assets are far from ready to be classified as a real currency.
The firm issued its own press report, titled “Institutionalization of Cryptoassets.” In this article, one of the focal points appears to be the challenges that the industry already deals with in the path to adoption by the rest of the market, especially with banks. Essentially, they believe that the only way for cryptocurrency assets to have a chance of reaching their full potential, they must go through “institutionalization.” Specifically, KPMG says,
“We believe this is a necessary next step for crypto to create trust and scale.”
Presently, as the report puts it, Bitcoin has not reached a point of being called a currency, which it will require to be considered for institutionalization. There will be three criteria met before this is possible for which Bitcoin and other assets must be used as – a unit of account, a store of value, and a unit of exchange.
As a unit of account, TheNextWeb said that cryptocurrency already meets the requirements. As a store of value, KPMG chief economist Constance Hunter believes the assets are too unstable. Hunter wrote,
“Consider for a moment extending a person or entity a loan in a cryptocurrency. The value is too unstable at the moment to be assured repayment. Under these conditions, neither lenders nor borrowers would be willing to take the risk of transacting in cryptocurrencies.”
Borrowing and lending in the crypto market, considering the risk of losing value, is a “fool’s errand” to Hunter, making the assets too volatile to meet this requirement.
For the final qualification, Hunter explained,
“In order to be a medium of exchange, a crypto must be a store of value. In order to be a store of value, the speculative nature of crypto must dissipate. Until at least one crypto meets all three criteria, they cannot be considered full currencies.”
Even with these challenges, KPMG still seems to recognize the multiple use cases that cryptocurrency has successfully been involved in. They comment,
“There are real problems in the global financial services ecosystem that cryptoassets are looking to address. More participation from the broader financial services ecosystem will help drive trust and scale for the tokenized economy and help the crypto market grow and mature.”
Finding solid-use cases, which Hunter also says is a means to reduce some sort of “friction” in the economy, is crucial. She adds,
“If a crypto could achieve enough stability of value to be used for this purpose, it could eliminate the need to have bank accounts in multiple countries and could allow individuals to transfer money to anyone without paying wire fees. If a fully equipped crypto that has a stable value becomes easier and less expensive to transact than a government-issued fiat currency, it could be an innovation that becomes ubiquitous in the global financial services system.”
There are still many regulations and guidelines to be established in the economy, especially concerning taxes. With the way that KPMG basically outlined a way to merge cryptocurrency into the traditional finance sector, it could become incredibly simple to find new opportunities for adoption.
Still, TheNextWeb warns,
“However, if Bitcoin’s identity as a real currency relies on being adopted by the very financial system it was built to rebuke, I think we may have found the true fool’s errand.”