Global accounting firm KPMG emphasizes that robust custodial practices are critical for increasing Bitcoin (BTC) adoption among institutions and businesses.
In a recent report titled “The Importance of Custodians in Bitcoin Adoption and Ownership,” KPMG highlights the vital role custodians play in safeguarding Bitcoin assets, which is crucial for the industry’s expansion.
Importance of Strong Security Frameworks
KPMG underscores the necessity for custodians to establish strong security frameworks to handle emerging threats. Security remains a key driver of adoption, and the firm stresses that without proper security measures, Bitcoin’s growth could be hindered.
Role of Custodians in Simplifying Bitcoin Management
Bitcoin’s decentralized nature allows users to have direct control of their assets. However, managing cryptographic keys can be complex. According to KPMG, custodians significantly reduce this complexity, making Bitcoin holdings easier to manage for new investors.
The report outlines that custodians need to enhance their security measures and comply with regulatory standards to protect against internal and external risks. Notable events like the Mt. Gox and FTX collapses, which resulted in billions of dollars lost, demonstrate the consequences of weak custodial oversight.
Custodians and Bitcoin ETFs
The report also highlights the increasing role of custodians in the growth of Bitcoin exchange-traded funds (ETFs). Custodians are responsible for securely holding the underlying assets for Bitcoin ETFs, which have accumulated over $59 billion in assets under management.
Need for Transparency and Compliance
KPMG calls for greater transparency in custodial practices, recommending proof-of-reserves reporting and enhanced operational reliability. These practices can help build trust and confidence among investors and participants in the Bitcoin ecosystem.
Additionally, the firm stresses the importance of regulatory compliance. Custodians must adhere to anti-money laundering (AML) regulations and ensure oversight from agencies like the SEC and FinCEN.
Adapting to Emerging Threats
As the Bitcoin landscape evolves, custodians need to stay ahead of emerging threats, including those posed by artificial intelligence. They must also adapt to new technologies such as Layer-2 solutions and collaborative custody models.
Final Recommendations
KPMG’s report concludes by urging custodians to prioritize security, compliance, and transparency. These factors are key to building investor confidence and protecting the integrity of the growing digital asset market.
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