Global accounting firm KPMG emphasizes the importance of strong custodial practices in driving Bitcoin (BTC) adoption among institutions and businesses.
According to KPMG’s report titled “The Importance of Custodians in Bitcoin Adoption and Ownership,” custodians play a crucial role in securing Bitcoin holdings and fostering industry growth.
The report highlights the need for custodians to have robust frameworks in place to address emerging threats, emphasizing that security is paramount for adoption.
Critical Role of Custodians
The report explains that while Bitcoin’s decentralized nature allows users to control their assets, managing cryptographic keys can be challenging for many.
KPMG states, “Custodians reduce the complexity and risk of managing bitcoin holdings, making it easier for new investors.”
KPMG identifies six critical attack vectors that custodians must address, including threats from hackers, internal fraud, and operational failures, citing past collapses like Mt. Gox and FTX as examples.
The report also underscores the importance of custodians in supporting Bitcoin exchange-traded funds (ETFs), which rely on custodians to securely hold underlying assets.
Transparency and Compliance
KPMG calls for custodians to adopt transparent practices, such as proof-of-reserves reports and enhanced operational reliability, to build trust in the system.
Regulatory compliance, particularly adherence to anti-money laundering laws and oversight from agencies like the SEC and FinCEN, is crucial according to KPMG.
The report warns custodians to stay vigilant against emerging threats, including those posed by artificial intelligence, and adapt to new challenges like Layer-2 solutions and collaborative custody models in the evolving Bitcoin landscape.
KPMG’s recommendations stress the need for custodians to prioritize security, compliance, and transparency to instill investor confidence and safeguard the digital asset market.
