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Blockchain, the best known use case of DLT, and digital assets are a notable success story: there has been a radical shift away from the impression of limited use options and the public image of opaque cryptocurrencies. Distributed ledger technology (DLT) has found its way on to the CEO agenda in the financial industry.
Alongside the traditional cryptocurrencies like bitcoin and ether, the first market participants are starting to tokenise physical assets such as art, real estate or securities. While traditional players are largely being cautious in their approach to this market with its often-unclear regulations, crypto enthusiasts are driving developments at a tearing pace.

The possible uses offered by DLT and its potential for influence are being compared with the introduction of the internet. It also provides the world of finance with some impressive opportunities. It was on the technical basis of blockchain that bitcoin, the first cryptocurrency, was established in 2009.
The introduction of Ethereum in 2015 saw the creation of a next-generation DLT. Ethereum is considered one of the first development platforms for crypto projects and continues to enjoy great popularity despite high transaction costs. By programming smart contracts directly on the blockchain, Ethereum enables the mapping of contracts and the execution of conditional transactions.
The option of initial coin offerings (ICO), i.e. raising capital by issuing coins, sparked the big initial hype surrounding cryptocurrencies and helped to double the number of tradable cryptocurrencies from the end of 2016 to the end of 2017.
The investors are speaking out clearly: demand for digital assets, initially driven by crypto enthusiasts, is increasing not just among private individuals but also among family offices and institutional investors. Clients are looking for secure mapping of services and trustworthy providers.
This development is causing supervisory authorities and international and intergovernmental organisations to concern themselves with DLT in a drive to create regulatory frameworks and standards. Regulatory certainty is the basic requirement for market acceptance and serves to promote the national locations in setting up DLT ecosystems.

Grafik Digital Assets

It's not just the rising demand for native digital assets like the well-known crypto currency coins that is changing the market. The use of tokenised assets like securities and the technology behind has the potential to create more efficient markets, and essentially optimises the manner of how assets and services can be exchanged. The DLT has disruptive elements along the entire value chain of banks and asset managers. Processes can be made leaner thanks to the automation of activities  - or they can even disappear completely through the use of DLT. The disruptive nature of DLT means that the value chain and the associated processes and business models need to be fundamentally rethought. 

Grafik Digital Assets

Processes currently performed with the involvement of intermediaries, such as settlement and clearing, are currently complex, time-consuming and inefficient. Using DLT as an underlying technology standard promises to bring shorter transaction times and greater transaction security thanks to a single source of truth, resulting in lower costs.

Important market participants have realised worldwide that the innovative force of digital assets will permanently change the financial industry. Increased regulatory certainty will also lead to greater investment in the necessary infrastructure and to market entry. European banks and asset managers will have to explore their own strategic market position  - this will be a key component of overall strategy and business operations  - and new, innovative players will enter the market.

KPMG can draw on reliable advisors who understand innovative business models in the new market terrain and who offer a comprehensive service portfolio. We are a thought leader, sparing partner and implementation partner for complex issues, including:

Regulation

  • Advice for top decision-makers on current and future regulatory frameworks and structuring possibilities
  • Support with all licence issues and applications as well as support in coordinating with national and international supervisory authorities and setting up stable business and operating models in line with regulations
  • Regulation screening with a focus on relevant developments concerning digital assets

Value added and business model

  • Design and implementation of DLT infrastructure to optimise value chains
  • Business model innovation and expansion
  • Market studies and benchmarking of traditional and new market participants
  • Impact analyses as well as benchmarking and design of processes and outsourcing structures

Thought leadership

  • Transfer research and development of specific use cases for all digital asset issues underpinned by the necessary business cases, including in combination with fiat issues
  • Scenario development for the future topics of metaverse and NFTs
  • Design and innovation advice on digital euro and SWOT analyses for financial service providers

If you have any questions on digital assets and related topics, please get in touch. We look forward to hearing from you.