Netherlands-based KPMG, one of the “Big Four” professional services firm which also include Ernst & Young (EY), PwC, and Deloitte, recently released a report in which it noted that bitcoin (BTC) and other cryptoassets may not yet be considered a legitimate store-of-value (SoV).
In August 2018, KPMG had said that the digital currency market was maturing, and that it was on its way to moving beyond its experimental stage.
Cryptos Are Not A Good Store Of Value
KMPG’s research report, titled: “Institutionalization of Cryptoassets”, concluded that bitcoin and other digital assets are not only an unstable SoV, but they are also not useful as a medium-of-exchange (MoE).
The giant multinational auditing firm attributed the poor performance of cryptoassets to investors’ lack of trust and confidence in their ability to achieve mass adoption. Moreover, KPMG’s report noted that high levels of volatility and scalability issues of blockchain-based cryptocurrencies stand in the way of them being used as effective MoEs and SoVs.
"More Participation" From Institutions Is Required To "Reform" Cryptos
According to KMPG’s report, which includes contributions from San Francisco-based crypto exchange, Coinbase, Tom Lee’s Fundstrat Global Advisors, and Morgan Creek Digital, cryptoassets will have to be “reformed” by established financial institutions - before they have a chance at achieving mainstream adoption.
Constance Hunter, KMPG’s chief economist, thinks that “more participation from the broader financial services ecosystem will help to drive trust and scale for the tokenized economy.
Moreover, Hunter explained that large financial institutions will have to work cooperatively with exchanges and payments solutions providers, particularly the leading fintech firms - in order to determine what is required to integrate cryptoassets into the world’s financial system.
Highly Speculative Cryptocurrency Investors
At present, most analysts believe that the digital currency market is mainly driven by speculative investors.
As CryptoGlobe reported in May, Steven Eisman, an experienced investor who is well-known for shorting collateralized debt obligations (which allowed him to profit from the housing bubble between 2007-2008), had said that cryptos were only good for “speculation.”
Eisman questioned (back in May 2018):
I have my doubts about it. My doubts center around the fact what's the social utility of cryptocurrency? It's good for speculation and good for money laundering. ... I have no idea how to value [bitcoin] and I don't think anyone else does either.
Goldman Sachs: Digital Currencies "Will Not Retain Value"
In August, giant Wall Street investment bank, Goldman Sachs, released a report in which it stated that cryptocurrencies “will not retain value” and did not deserve the attention they had received from mainstream media.
Goldman Sachs’ financial outlook report, which was published in August, arrived at the same conclusion as KPMG’s recently released research document on cryptoassets. The American multinational investment bank had said that cryptos were unable to function effectively as money, therefore, they will not retain the short-term gains.
However, KMPG’s latest report has mentioned that digital assets will eventually become a legitimate asset class, but only after addressing current challenges associated with them. These include how to develop a proper taxation system for digital currencies - while also ensuring regulatory compliance, and the security of the platforms on which they are traded.
More Careful Examination Required
As CryptoGlobe reported in August, CoinList CEO, Andry Bromberg, had said during an interview with Bloomberg that there are no "experts" in the crypto space. Indeed, research published by KPMG, Morgan Stanley, and other large financial organizations might suggest to many that they themselves are only beginning to understand how cryptoassets have been developed.
Because digital currencies are a relatively new concept, research reports usually come to the same basic conclusions that appear to be common knowledge for those who are actively involved in the crypto space. Similar to the way in which crypto-related technology will take time to evolve, it might also take time before researchers are able to analyze them more thoroughly and provide deeper insights.