KPMG, the global consulting firm, has highlighted the need for robust custodial practices in the crypto industry to drive institutional adoption of Bitcoin. In its report, “The Importance of Custodians in Bitcoin Adoption and Ownership,” KPMG stressed the critical role custodians play in safeguarding Bitcoin investments, emphasizing the necessity for strong security frameworks to address emerging threats.
The report pointed out that while Bitcoin’s decentralized nature allows users control over their assets, managing cryptographic keys remains a challenge for many investors. Custodians, KPMG noted, help reduce the complexity and risks involved in managing Bitcoin holdings, thus easing the entry for new investors. The firm underscored the importance of enhancing custodial security and regulatory compliance to protect against internal fraud, hacking, and operational failures, citing the collapses of Mt. Gox and FTX as examples of custodial oversight failures that led to substantial losses.
KPMG also called for greater transparency among crypto custodians, recommending practices such as proof-of-reserves reports and improved operational reliability to build trust. The firm emphasized the need for custodians to comply with anti-money laundering regulations and oversight from authorities like the SEC and FinCEN. Additionally, KPMG urged custodians to stay ahead of emerging threats, including those posed by artificial intelligence, and to adapt to developments such as Layer-2 solutions and collaborative custody models.
As institutional interest grows, particularly with the rise of Bitcoin exchange-traded funds (ETFs), custodians have become integral to securely holding more than $59 billion in crypto assets. Banking giants like Standard Chartered have recognized this opportunity and are entering the crypto custody space. KPMG’s recommendations emphasized that focusing on security, compliance, and transparency will be crucial to fostering trust and ensuring the integrity of the expanding digital asset market. Despite challenges such as the SEC’s controversial SAB 121 accounting rules, firms like BNY Mellon have secured licenses to offer crypto custodial services in the U.S., further highlighting the industry’s momentum.
Source: crypto-news-flash.com
