informationinformation, KPMG, one of the Big Four accounting firms, recently released a report "Institutionalization of Encryption Modules: The Encryption Model Has Arrived." Are you ready to institutionalize? ". The report revealed that crypto assets have emerged as an asset class for institutional investors, with private banks in Switzerland, asset managers in the U.S., and hedge funds in the U.K. all offering their clients exposure to BTC.

According to the report, crypto assets also face institutional challenges. The report mentioned that there are still many hurdles to overcome before blockchain-based digital assets can become a financial product for all investors. The report summarizes six major challenges: regulatory compliance, fork governance, KYC management, network security, financial reporting, and tax implications.

In terms of regulation, cryptocurrencies need to comply with existing regulations. As the asset class expands, it will also be written into new regulations. Complying with financial regulations will enable most financial institutions to further promote digital currencies.

In terms of fork governance, a fork may cause serious damage to the encryption business, and industry standards need to be set for institutionally recognized cryptocurrencies to ensure the continuity of operations even in the event of a hard fork.

While the idea of ​​a crypto-industry-wide KYC framework conflicts with the anonymity of the blockchain, KPMG said that KYC/AML requires real-name identification of users in order to institutionalize cryptocurrencies due to government regulation involved. process becomes a must. Therefore, cryptocurrencies need to be established to comply with the legal rules of KYC/AML.

Security is another challenge facing the cryptocurrency industry. Currently, digital assets are the main target of cybercriminals, and this situation is unlikely to change significantly for a long time as the cybercrime market continues to grow. Therefore, in the established financial industry, it is necessary to further build encrypted network security protocols and security supervision for institutional investors.

A final challenge is financial reporting and tax implications. On the financial side, current crypto accounting is primarily aimed at retail investors, so standards for accounts and financial reporting need to be developed. At the same time, cryptocurrency tax laws must be established. Tax laws vary from country to country, and existing tax legislation is unclear on this issue, so legislators need to address this issue.

If the challenges pointed out in the report are actively addressed, it can promote the institutionalization of the encryption industry and further enhance the active use of cryptocurrencies in traditional industries. The report said that the use of cryptocurrencies in the financial industry could lead to new business models and investors.