According to Joe David, Founder and Managing Director of Nephos Group, accounting firms in the UK need to consider the direction towards cryptocurrencies and digital assets in order to stay competitive.
“As crypto becomes more mainstream, accountants are getting more questions about it and realizing that this is not an area that can be easily picked up and dropped.
“It’s a tidal wave that will hit a lot of companies if they’re not careful.”
David calls crypto “the future of finance” and argues that to make advances in this space, companies of all sizes need to be open-minded – whether by developing a full-fledged service branch or simply strengthening their understanding of the topic.
KPMG UK has made significant strides in this area, strengthening its crypto and payments team and appointing former CryptoUK chief executive Ian Taylor to lead its digital assets team.
Speaking to Accountancy Age shortly after his appointment in May, Taylor noted that accounting firms have “no choice” but to start developing in-house capabilities around crypto and digital assets.
“Twenty years ago everyone was talking about needing an internet strategy and an e-commerce strategy. The same discussions are now being had in companies about crypto.”
Even in an uncertain regulatory environment, digital asset adoption in the UK has surged in recent months. According to a new study by crypto exchange platform Coinbase, a third (33%) of consumers in the UK own some form of cryptocurrency asset – up from 29% in October 2021. Additionally, 61% of consumers plan to increase their holdings over the next year 12 months, compared to 54% in October 2021.
A similar pattern is emerging among UK corporates and financial institutions. A study published by Bitstamp in April found that out of 250 companies surveyed (including banks, hedge funds, pension fund managers and brokerage firms) around 70% said they currently trust cryptocurrency products.
And despite a historically vague approach to digital assets, the UK government unveiled a plan in April to make the UK a global cryptoasset technology hub.
The plans include new regulations for stablecoins, a Royal Mint NFT and a sandbox to help companies experiment and innovate.
“The first use case of crypto is finance, so if there are banks or wealth managers that don’t currently have a product or service, think about it,” Taylor said.
“Most people are starting to realize that this is huge, so it’s the perfect time for me to come in and help.”
Taylor’s appointment is the latest in a series of crypto-related developments for the Big Four firm, which will launch KPMG Chain Fusion, a suite of analytics capabilities targeting the institutional cryptoasset market.
Talent and education are key
Taylor goes on to outline the key elements of KPMG UK’s strategy for its growing Digital Assets practice, explaining that phase one included a “really progressive” move to hire a dedicated resource to lead the department – a first for the UK accounting market.
Phase two will address the go-to-market strategy for the service offering, he says, adding that combating the negative stigma and resulting “low risk appetite” for crypto among customers is key.
“It’s not just about advice – I like to think we go with them [clients] on a trip. Another aspect we will look at is how we can develop a risk appetite to work with these new companies because unfortunately crypto has this narrative of consumer harm and illegal activity at play.”
According to David, Nephos Group is taking a similar strategic approach to boosting its offering of crypto services, particularly in terms of talent acquisition.
“It depends on the company, but we’re focused on becoming number one, so we’re hiring aggressively in that space.”
Nephos Group is also considering the prospect of acquiring a number of smaller one-man practices with cryptocurrency expertise, adds David.
However, he is quick to distinguish between the ambitions of the “number one” crypto specialist and those of an average professional services practice, noting that all accountants should strive to develop a basic working knowledge of digital assets.
“Not everyone needs to dedicate their whole life to crypto like we do as a company – just make sure you have a high level of knowledge in the key areas.”
However, he concedes that there is a healthy balance to be struck, and that too simplistic an approach could be detrimental.
Too many accountants rely on their understanding of how crypto is traded – “the easy part” – rather than on commonly misunderstood areas like decentralized finance (DeFi) and liquidity pools, he says.
This is largely the basis of what David calls the Nephos Group’s “educational” approach to crypto and digital assets. As a result, the firm will be releasing a package of training content for its clients and the wider accounting industry in the near future.
“Customers are increasingly investing in more of these weird and wonderful things, and it’s very naïve to assume that just knowing what crypto is and how to use it is enough,” says David.
“It’s really important that people focus more on understanding the big picture of crypto, otherwise they’re going to cause problems for their customers.
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