Accounting firms in the UK need to pay attention to the direction of the journey towards cryptocurrencies and digital assets to remain competitive, according to Joe David, founder and CEO of Nephos Group.
“Because cryptocurrencies are becoming more mainstream, accountants are getting more questions about it and realizing that this is not an area that you can just pick up and leave again.
“It’s a tidal wave that will hit a lot of companies if they don’t pay attention.”
Hailing cryptocurrencies as “the future of finance,” David argues that companies of all sizes need to be open to making inroads into the space, whether that’s developing a full-service arm or simply bolstering their understanding of the subject.
KPMG UK has made significant progress in this area by strengthening its crypto and payments team, appointing former CryptoUK CEO Ian Taylor as head of its digital assets team.
Speaking to Accountancy Age shortly after his appointment in May, Taylor commented that accounting firms “have no choice” but to start building in-house capabilities within the crypto and digital asset space.
“Twenty years ago, everyone was talking about the need for an Internet strategy and an e-commerce strategy. The same discussions are now being had in companies about crypto.”
Even under an uncertain regulatory environment, the adoption of digital assets in the UK has increased in recent months. According to new research from cryptocurrency 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 Consumers plan to increase their holdings in the next 12 months, up from 54% in October 2021.
A similar pattern is emerging among UK business and financial institutions. Research published by Bitstamp in April found that, 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 undefined focus on digital assets, the UK government set out a plan to turn the UK into a global crypto asset technology hub in April.
Plans include new regulations for stablecoins, Royal Mint NFTs, and a sandbox to help companies experiment and innovate.
“The first use case for crypto is finance, so if there are banks or asset managers that don’t currently have a product or service, they’re thinking about it,” Taylor said.
“Most people are starting to realize 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, with the launch of KPMG Chain Fusion, a suite of analytics capabilities targeting the institutional crypto-asset market.
Talent and education are key
Taylor goes on to outline the key elements of KPMG UK’s strategy for its growing digital assets arm, explaining that phase one involved a “really progressive” move to hire a dedicated resource to lead the division, a first for the UK accounting market. United Kingdom.
Phase two will address its go-to-market strategy for the service offering, he says, adding that addressing the negative stigma and resulting “low risk appetite” for cryptocurrencies among customers is key.
“It is not just about consulting, I like to think that we go with them [clients] on a trip. So another aspect that we will look at is how can we develop a risk appetite to work with these new businesses, because unfortunately cryptocurrencies have this narrative that there is consumer harm and illicit activity involved.”
According to David, Nephos Group is taking a similar strategic approach to beefing up its crypto services offering, particularly when it comes to talent acquisition.
“It depends on the company, but we’re focusing on trying to be number one, so we’re hiring aggressively in that space.”
Nephos Group is also considering acquiring a number of smaller one-man practices with cryptocurrency expertise, adds David.
However, he is quick to distinguish between the ambitions of the firm’s “number one” crypto specialists and those of your average professional services practice, noting that all accountants should aim to develop a basic working knowledge of digital assets.
“Not everyone needs to dedicate their whole lives to crypto like we do as a company; just make sure you have high-level knowledge in the key areas.”
However, he admits that there is a healthy middle ground to be struck, and that an overly simplistic approach could be detrimental.
Too many accountants rely on his understanding of how cryptocurrencies are traded, “the easy part,” rather than commonly misunderstood areas such as decentralized finance (DeFi) and liquidity pools, he says.
This is very much the basis for what David describes as the Nephos Group’s “pro-education” approach to crypto and digital assets. As a result, the firm is poised to launch an educational content package for its clients and the accounting industry in general in the near future.
“Customers are investing more and more in more of these weird and wonderful things, and it’s very naive to assume that just knowing what crypto is and how to transact is enough,” says David.
“It is really important that people focus more on understanding the big picture of cryptocurrencies, otherwise they will cause problems for their customers.