One of the four global auditing giants, KPMG said that the cryptocurrency market needs to improve how it protects digital assets to keep the $ 245 billion industry in continuous growth.
The accounting firm wrote in a report released on Monday that hackers have stolen at least $ 9.8 billion in digital assets since 2017 due to lax security or poorly written code. KPMG said institutional investors' adoption of cryptocurrencies such as Bitcoin and Ethereum has given them a place in portfolio competition. The report emphasizes that since hedge funds have become interested in digital assets and some of them are competing for cryptocurrency investors, this makes token protection more important than ever.
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In the report, KPMG said that after Bitcoin reached an all-time high of nearly $ 20,000, crypto assets such as Bitcoin and Ethereum have become popular among institutional investors. The purpose of the report is therefore to urge hedge funds to be cautious, as all forms and sizes of cybercrime activities can steal cryptocurrencies.
Sal Ternullo, co-head of KPMG's crypto asset services and co-author of the report, said:
"If they cannot be protected in the same way as cash, stocks, and bonds, institutional investors will not risk owning crypto assets.
The earliest companies to provide cryptocurrency custody services include asset management giant Fidelity Investments and the exchange division of the NYSE parent company Intercontinental Exchange (ICE). Coinbase and Gemini Trust.
Cryptocurrency is a bearer instrument such as cash or certain types of bonds, which means that the person who holds the currency is the owner. However, what is held-called a private key-is a random string stored on a digital wallet or paper. When the user loses or steals the key, these assets will disappear forever. For traditional financial companies used to protecting non-digital assets, this makes key escrow a challenge.
KPMG said in its report:
"With the proliferation of crypto assets, custodians have a huge opportunity to profit-by earning management fees for direct custody services, and by making possible proximity services only in the emerging crypto ecosystem."
KPMG said the industry needs to deal with strict regulations for storing cryptocurrencies for customers. As with all financial transactions, banks and brokers must comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. The company said that even established financial institutions with established compliance programs must "enhance their measures to address the unique concerns of crypto asset and related data management challenges."