“Big Four” accounting and professional services firm, PricewaterhouseCoopers (PwC), is reportedly looking into “best practices” for issuing USD-backed stablecoins.
PwC’s Hong Kong division has partnered with the Loopring Foundation (a community focused on building protocols specifically for decentralized crypto exchanges) - in order to explore how to effectively manage the process of issuing stablecoins.
A Need For "Enhanced Trust"
On November 6th, PwC’s Hong Kong branch announced that its current stablecoin research effort has come after it advised blockchain-based lending platform, Cred, regarding the ongoing development of its USD-backed crypto token.
There's a need for enhanced trust. So we are asking how things would look inside a regulated context; what are the standards, protocols, best practices and how would they fit?
The Loopring Foundation said its collaboration with PwC is aimed at increasing transparency around the process of developing and issuing securities token offerings (STOs) and stablecoins.
Loopring Foundation, PwC Explore Stablecoin Market
Daniel Wang, the founder and CEO of the Loopring Foundation, said:
The level of security and auditablity empowered by the Loopring Protocol will play an essential role in regtech applications.
Gee, who’s in charge of PwC’s risk assurance for emerging technologies at the professional service firm’s China and Hong Kong division, said that the company was looking into becoming a regular auditor and advisor of stablecoin projects.
He remarked: "We are obviously looking at this area. So are all the major firms. I would say even beyond the Big Four." Moreover, Gee pointed out that there are currently no standards, or even a basic regulatory framework, in place for stablecoins.
No Established Standards, Regulatory Guidelines
Developing regulatory guidelines for stablecoins is not a simple process as they present “a very diverse scenario,” Gee noted. This means there are an increasing number of USD-backed tokens being launched, but they have not been developed according to a uniform set of standards.
Gee also commented on “trust” issues related to stablecoins:
This may look like a very simple ask from the crypto community, but auditors are in the public trust business, operating under a very robust set of standards, so it's not a simple question that we can actually give an answer to overnight.
In addition to looking at whether projects comply with know-your-customer (KYC) and anti-money-laundering (AML) requirements, Gee said auditors are responsible for assessing how the issuance and redemption process of stablecoins is being managed.
Professional services firms also have to determine whether a stablecoin issuer is providing appropriate custody services and whether their platform is adequately secure to handle transactions.
Not As Simple As It May Seem
It's not just looking at the $10 million or $10 billion in your accounts. It involves looking at the entire operation: the entry and exit and all the controls surrounding them.
Cameron Winklevoss, the co-founder of Gemini Trust Company, which has introduced its own stablecoin, the Gemini Dollar (GUSD), had said last month:
There is no financial report framework w/r/t to audit conformity w/ a stabelcoin. So you can't perform an 'audit.' You must instead rely on a 3rd party to attest to whether an assertion (that there is a 1:1 peg) is accurate.
As CryptoGlobe reported in late July, PwC’s Switzerland branch had been appointed as auditor for the controversial Tezos project - which managed to raise $232 million during its initial coin offering (ICO) in July of 2017.