Category Archives: KPMG

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Abu Dhabi Financial Institutions Complete Phase 1 of Blockchain e-KYC

Abu Dhabi Financial Institutions Complete Phase 1 of Blockchain e-KYC

The Abu Dhabi Global Market (ADGM) has declared that the first phase of its blockchain-based electronic-Know-Your-Customer (e-KYC) utility project has been completed successfully.

The e-KYC project was launched in March of this year by a consortium consisting of Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Al Ansari Exchange, Al Fardan Exchange, First Abu Dhabi Bank, and UAE Exchange, with the Financial Services Regulatory Authority (FSRA) of ADGM taking the lead.

The goal was to test the operational and technological values of a blockchain-based KYC system, and have a framework that adapts to any form of business with a sustainable model.

CEO of the FSRA of ADGM Richard Teng said, “By harnessing the power of technologies such as blockchain, the e-KYC project has demonstrated tangible benefits that may be offered by an e-KYC utility for financial institutions in the UAE. In addition to enhancing KYC checks across the industry, the utility can achieve significant cost efficiencies and financial inclusion driven by unified KYC standards.”

After four months of trial, the review committee, along with auditing firm KPMG published a report detailing a “successful” first phase test of the e-KYC project.

As part of the development process, FSRA in consultation with the consortium also developed a “governance framework and business model on which the e-KYC utility can operate on an inclusive and sustainable basis”.

Four key insights were provided, one of which included the use of blockchain environment as an important facilitator of the e-KYC platform in determining the validity of KYC documentation: “Consortium members can successfully share and validate simulated KYC documentation and data updates about the client on the prototype in a secure environment, supported by blockchain technology.”

Another aspect of the report described the product as being compliant with up-to-date data protection requirements, stating that “individual clients can be empowered to decide how their personal data can be shared in the utility, enabling conformance with data protection (GDPR) requirements”.

After a satisfactory completion of the first phase, the second phase is to begin by facilitating SME access to banking services.

For Abu Dhabi, this is an important milestone for blockchain development, especially with regards to mainstream application in the traditional financial markets. On the cryptocurrency side of things, efforts towards standardizing the industry are also being considered, with Abu Dhabi’s head financial regulator calling for internationally-standardized regulations for cryptocurrencies to prevent both criminal activities and their negative impacts on the image of virtual currencies.

 

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Is Institutionalization the Missing Driver of Bitcoin’s Fortunes?

A tokenized economy seems a distant concept as the cryptocurrency market flutters again, leaving influencers and experts again insisting that institutionalization may be the key to the market regaining the stability that it so badly needs.

With another 24-hour drop in major cryptocurrency prices, the current cyber-buzz is on Bitcoin Cash’s battle between its forks in Bitcoin ABC and Bitcoin SV, focusing on the potential damage this is causing to market stability, which at best is trying to re-find its feet after months of encouraging performance.

It has been suggested that this hash war is just a sideline to the main causes of instability in the cryptocurrency market, which is the lack of large-scale participation of fintech companies, banks, payment institutions, exchanges, broker-dealers, and other entities in the financial ecosystem.

Last week’s Bitcoin Cash hard forks coincided with Bitcoin, Ripple (XRP) and Ethereum shedding billions of dollars in value and has rebooted arguments among detractors that cryptocurrencies are proving to be an unsuitable store of value and, therefore, not yet equipped for currency status.

KPMG, one of the Big Four auditors, along with Deloitte, Ernst & Young (EY), and PricewaterhouseCoopers (PwC) has a completely alternative spin on this view and sees the lack of large investment across the field as the only missing link. KPMG chief economist Constance Hunter illustrates the problem:

“Consider for a moment extending a person or entity a loan in a cryptocurrency… The value is too unstable at the moment to be assured repayment. Under these conditions, neither lenders nor borrowers would be willing to take the risk of transacting in cryptocurrencies.”

The problem is how to attract the kind of investment needed to kickstart a tokenized economy which is ripe and poised to become the global financial structure of the future. Hunter suggests:

“More participation from the broader financial services ecosystem will help drive trust and scale for the tokenized economy and help the crypto market grow and mature… Crypto products and services are already starting to pivot and the global financial services ecosystem is also beginning to retool itself for the tokenized economy.”

“I didn’t sleep well last night,” Travis Kling, founder of the hedge fund Ikigai commented. “There’s a small chance that it’s difficult to estimate, that something really bad could happen related to Bitcoin Cash that could then impact the entire crypto market.”

Such splits are clearly deterring Hunter’s big players from the market, argues Financial Times journalist Jemima Kelly in her story, Bitcoin’s repeated splits undermine its long-term value, who suggests, regarding the Bitcoin Cash fork, that “anyone trying to market such a thing — however many new bells and whistles they put on it — is essentially trying to sell hot air”.

KPMG maintains that somehow the market needs to regain its confidence and that the next step is around the corner, insisting, “Cryptoassets have potential. But for them to realize this potential, institutionalization is needed.”

Clearly, reinventing Bitcoin isn’t helping.

 

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Iceland Comes out of the Cold With First Bitcoin Trading Pair

Iceland’s Financial Supervisory Authority (FME) has announced the first registration of a cryptocurrency exchange in the country, allowing users to trade Bitcoin.

The exchange Skiptimynt, will feature two trading pairs, the Icelandic Krona (ISK)/Aurora Coin(AUR) and Bitcoin (BTC)/ISK. Aurora coin is Iceland’s alternative to Bitcoin created in 2014.

In reality, Skiptimynt isn’t the country’s first exchange as that distinction rests with ISX launched in 2016. However, that exchange is largely inactive and doesn’t offer a Bitcoin trading pair, limited to the ISK/AUR pairing.

When Auroracoin was launched it caught the eye of the country including politicians, the cryptocurrency community and the media. Although, very few Icelandic shops and services accepted payments in AUR and since then it has been largely ignored.

After its failed attempts to  “break the shackles of the fiat currency financial system in Iceland”, the country has primarily become a center for cryptocurrency mining. This is largely due to its combination of abundant renewable energy sources and cold climate – both suited for mining operations as they result in low electricity tariffs and cooling costs. Lower costs generate higher profits for cryptocurrency miners, which has created a situation in Iceland where electricity consumption for mining has overtaken household use.

Prominent politicians in Iceland have suggested that the country’s economy could be at risk given a cryptocurrency market crash. Government finance minister Bjarni Benediktsson said that the crypto threat “cannot be excluded as a risk factor” to an economy still recovering from the global financial crisis.

Styrmir Hafliðason, security and quality manager at Skiptimynt data center, is responsible for dealing with the weekly flood of mining applications. He disagrees, suggesting, for example, a crackdown on crypto by regulators wouldn’t impact the country, as crypto assets are simply held as zeros and ones in private centers, and therefore aren’t part of Iceland’s economy.

A recent report by KPMG claims that about 90 percent of the power consumption of Iceland’s data centers last year was dedicated to crypto mining.

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KPMG Study Reveals 2018 Blockchain Investment Has Already Outgunned 2017 Total

A KPMG study finds that fintech companies’ investment in blockchain technology in 2018 has already surpassed the entirety of 2017.

Capital growth

The Pulse of Fintech 2018‘ biannual study from one of the Big Four auditing and consultancy firms took a global look at the growth of fintech investments, which in the first six months of 2018 has broken past 2017 in spectacular fashion.

The study affirms that blockchain is “moving beyond experimentation”, noting that a majority of Q1 and Q2 investors in 2018 gravitated more toward established companies and organizations moving into “additional rounds of funding”. This is contrasting to 2017 which saw significant amounts of investment in startups, especially through initial coin offerings.

Venture capitalist blockchain investment so far this year has reached USD 858 million, more than 2017’s USD 631 million. These figures are bolstered by two enormous funding rounds: Circle, which raised USD 110 million and  Ledger cryptocurrency wallet, which recently raised USD 77 million.

Safwan Zaheer, Financial Services Digital & US Fintech lead for KPMG said, “There’s more VC flow available than opportunities to invest – a sign of tremendous growth in the space… Investments in blockchain related firms already doubled in the first half of 2018 compared to 2017. Blockchain has the potential to transform banking services. If banking systems were to be rewritten today they would be based on blockchain.”

The study acknowledges the versatile list of applications for blockchain technologies, which is a contributor to its growing success, especially within the financial sector. KPMG cites banking and insurance as two of the primary uses of the technology but also explains that blockchain can “enhance processes for any number of US and global businesses.”

Initial coin offerings

With regards to ICOs, the modern crowdfunding method has also seen a sharp rise, outpacing that of 2017. A similar June report released by another of the Big Four, PwC, found that a total of 537 ICOs in the first five months of 2018 have raised more than every ICO prior to 2018, with a total volume of USD 13.7 billion.

Again, a part-cause for the ICO figure exploding in 2018 is down to the EOS ICO which lasted for a whole year, raking in a record USD 4 billion, beating the previous record of Telegram’s controversial USD 1.7 billion ICO.

The Big Four have been looking at the growing industry with a piqued curiosity; in April 2018, it was reported that the firms were receiving daily enquiries into ICOs and cryptocurrencies from clients.

 

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