Data from traditional financial systems and blockchain protocols can be like oil and water—but a new product could pave the way for them to integrate more effectively.
The audit, tax and advisory giant KPMG has launched a service designed to connect the systems used by banks and fintech firms with those relied on by cryptocurrency and digital asset platforms.
KPMG Chain Fusion then standardizes the data from these two data streams so businesses can manage risk and achieve regulatory compliance as well as meet expectations when it comes to customer account management, security checks, and anti-money laundering measures.
“Regulators and auditors expect fully implemented controls and processes within and across a cryptoasset business—whether they are cryptoasset or traditional systems or anything in between,” Sam Wyner of KPMG Cryptoasset Services explained. “If you are a blockchain or digital asset-based business, you will have separate systems for everything
Tackling ‘significant challenges’
According to a release, KPMG Chain Fusion comes as increasing numbers of financial services institutions and fintech companies begin to offer services related to cryptocurrencies and other digital assets.
The firm said that the technology driving Bitcoin, stablecoin projects, and central bank digital currencies (CBDCs) is “fundamentally different from the traditional information systems that underpin existing financial market infrastructure”—and expressed optimism that Chain Fusion will help organizations that are accelerating their strategic roadmaps in response to increased pressure from investors.
“Leading cryptoasset technology solutions can address process and control requirements within their own systems, but the greater challenge is making sure systems can work together, with all the right processes and controls in place between those systems,” Wyner added.
One potential use case for KPMG Chain Fusion centers on allowing data stored on a blockchain to be easily cross-checked with the records held on off-chain databases.
Major financial institutions are beginning to take the plunge into the digital assets space.
In a recent poll, Fidelity Digital Assets revealed that nearly 80% of the 800 institutional investors it polled between November and early March said they found this new asset class at least somewhat appealing. “These results confirm a trend we are seeing in the market towards greater interest in and acceptance of digital assets as a new investable asset class,” Fidelity Digital Assets president Tom Jessop said. “This is evident in the evolving composition of our client pipeline, which spans from crypto native funds to pensions.”
And on June 10, Mike Novogratz’s Galaxy Digital teamed up with CME’s Bakkt to offer institutional investors and asset managers “white-glove service” as they build cryptocurrency positions. They intend to offer “the same caliber of market knowledge and trade execution expertise in BTC as they would expect from any established traditional finance desk,” said Tim Plakas, head of sales at Galaxy Digital Trading. “Galaxy provides that, while Bakkt delivers the high level of regulatory-compliant security required for storing digital assets.”
Komainu said it eventually plans to tokenize and issue traditional assets such as stocks and bonds digitally using blockchain technology.