Key challenges facing institutionalization of crypto

Key challenges facing institutionalization of crypto

What are the challenges organizations face as they begin to introduce crypto products?

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Atif Zaim

Principal, Advisory, Financial Services Solutions

KPMG in the U.S.

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Key challenges facing institutionalization of crypto

Here we examine the major challenges facing the crypto industry as organizations look to introduce crypto products, scale their businesses, and drive institutionalization.

Compliance with regulatory obligations: A patchwork of regulations has emerged and continues to evolve. Maintaining compliance with laws and regulations related to an array of financial crimes is already a major challenge. Now, regulators are focusing in on crypto businesses. What are some of the key regulatory obligations for a crypto business?

Fork management and governance: Forks occur when a single crypto blockchain breaks into two separate chains. They have a significant impact on crypto businesses. To both decide on fork acceptance and to continue to run effectively after a fork event, how does a business manage the technological, operational, financial, accounting, tax and customer relationship implications of the fork?

KYC and cryptoasset provenance: Crypto owners are identified not by names or account numbersbut by cryptographic addresses that can be created at any time, by anyone, anywhere. This presents a unique challenge to KYC programs. How does a crypto business determine asset provenance andbuild its KYC program?

Securing cryptoassets: Given the potentially high value of cryptoassets and the natively digital nature, crypto businesses and their customers are prime targets for cyber criminals. How can a business build a cyber security program for securing cryptoassets?

Accounting and financial reporting: Cryptoassets challenge traditional financial reporting boundaries. The accounting for these assets is an emerging area, with limited industry guidance. How should a crypto business account for crypto transactions and assets?

Tax implications: Information regarding the tax treatment of crypto remains limited. Crypto businesses may face sizable tax liabilities incurred on the sale or exchange of crypto and bear significant tax accounting burdens with respect to their holdings. What are the key tax implications for a crypto business?

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