The Big Four—Deloitte, PricewaterhouseCoopers (PwC), KPMG, and Ernst & Young (EY)—are the largest accounting firms in the world. Few corporate matters escape the grasp of their employees, who, combined, number more than a million.
They were quick to pick up on cryptocurrenciesand the wider potential of blockchain, using the technology to help “clients” (the Big Four’s word for people and businesses) overcome “challenges” (solve problems).
The crypto and blockchain work of the four firms is broad and, at a glance, fairly similar. All four companies grind through “risk” (pointing out the dangers of cryptocurrencies and blockchain, such as price volatility, poor code or hacks), and build “enterprise solutions” (software) for their clients.
But what better way to cut through the jargon than to hear from the people leading the crypto and blockchain efforts themselves? So… we did! Here’s what each of the Big Four firms is doing with blockchain and cryptocurrency.
Size: 219,000+ employees (2019)
Annual Revenue: $29.8 billion (2019)
If KPMG were a blockchain, Sam Wyner, co-leader of KPMG’s crypto wing, would be one of its most prolific miners. From his “home office” (bedroom) in New York, he “solves problems with blockchain”, for which KPMG rewards him with tokens, called “US dollars.”
Services offered by Wyner and his team include, according to the firm’s website: “strategic realization;” “requirements guidance;” “systems and operations integrations;” “managed services with the potential to address data governance” and “audit services such as platform audit and tax services.”
But what does any of that mean? Wyner unraveled the mystery. He told Decrypt that the company’s work is split between blockchain and crypto.
“When it comes to enterprise blockchain, clients are coming to us with problems where they think blockchain might be the right way to solve it,” he said. “We help clients, whether it’s looking at business cases, evaluating them, determining if blockchain is the right solution,” he said.
A case in point is life sciences, where KPMG’s built a blockchain system that tracks and traces pharmaceuticals across the supply chain.
Next comes crypto. “On the crypto side, it’s a little bit of a broader mix. We see clients that are asking us everything about strategy and product strategy, as well as on the risk compliance, anti-money laundering side,” said Wyner.
He mentioned that a big area of interest for KPMG right now is crypto custody. Ever since the Office of the Comptroller of the Currency (OCC), under Coinbase’s ex-counsel Brian Brooks, said that banks can act as crypto custodians, Wyner said that several large financial institutions have reached out to KPMG for help. “We’ve been working with clients on how to solve some of the problems that go along with that, whether it has to do with data, security or compliance,” he said.
Wyner also said that central bank digital currencies (CBDCs) have the potential to change KPMG’s blockchain practice the most. “I think that’s going to have a significant impact on how our clients are viewing blockchain based or digital assets in general,” he said, especially in larger economies.
Ernst & Young (EY)
Size: 284,000+ employees (2019)
Annual Revenue: $36.4 billion
Paul Brody is EY’s global innovation leader for blockchain. Normally based at the heart of Silicon Valley, in Palo Alto, California, he’s currently to be found quarantining in the Welsh countryside. Before embarking on his intercontinental odyssey, Brody took time out to talk to Decrypt.
“There’s a few things that we’re focused on,” he told Decrypt. “The first are business applications. We want to help our clients do business effectively on blockchain.”
To grease the wheels, EY’s created a platform called OpsChain, which helps companies manage the creation, transfer, purchase and sale of physical tokens. Though, sure, these could help, say, Goldman Sachs deliver on their plans for a world-dominating stablecoin, “right now, the major parts we have in OpsChain are things like product traceability [and] blockchain based procurement.”
Canadian Blood Services uses OpsChain to keep track of blood donations, and Merck Animal Health for vaccine traceability or Spinoza in Italy for food traceability. Another platform is Public Finance Manager, or PFM, used by governments and multinational agencies to manage public service applications.
Next up is its audit, tax, compliance and security platform, Blockchain Analyser. That lets auditors batch trace transactions, look up transaction history, apply tax rules to blockchain business transactions, and so on. “Our goal is to build a set of tools that allow you to manage pretty much any kind of tax and regulatory issue, or audit and compliance issue that you’re going to face over time doing business transactions on blockchain,” Brody said.
And then there’s blockchain consulting and development, as well as an R&D team, which focuses on privacy products, like the Baseline Protocol, Nightfall, and Zero-Knowledge Proof technology. All this helps the firm’s work on public blockchains—and this is what sets EY apart from the rest of the Big Four, said Brody. “We are committed to building scalable business applications on the public Ethereum blockchain. We’re the only large firm that has focused on public blockchains,” he said with pride.
EY’s also handling the Quadriga CX case, helping customers of the now-defunct crypto exchange retrieve funds lost when Gerard Cotten, its CEO, suddenly died while on a honeymoon to India. “I can’t actually tell you really almost anything about that,” Brody said.
Employees: 276,005 (2019)
Revenue: $42.4 billion (2019)
Alex de Vries is a senior consultant and blockchain specialist at PwC in the Netherlands. He tells Decrypt that the firm’s been experimenting with blockchain for the past two years, producing various proof of concepts for companies interested in blockchain, and explaining blockchain to companies that wanted to use it but weren’t sure how.
But times have changed. De Vries said that the industry has now matured to a point where he’s no longer simply educating people about the merits of blockchain, but double checking their work and helping them run their businesses. “People have kind of figured out how you can use this technology,” he said. “The ones that made it to the experimenting phase are now getting very serious and actually moving to production. And then of course, they need someone to, ideally, check what they’re built.” Smart contracts are immutable, after all, and an immutable error is hard to change after launch. PwC helps out with this sort of stuff.
To audit the smart contracts, PwC this year partnered with Swiss firm ChainSecurity, and in July published its first report, an assessment on a smart contract that tokenizes shares in a multi-million dollar real estate project regulated by Thailand’s Securities and Exchange Commission. “We were able to highlight several weaknesses in both the technical specification and the code itself, all of which have been successfully addressed prior to the go-live,” wrote Ralf Hofstetter, of PwC Switzerland, in a blog post late last month.
Employees: 312,000+ (2019)
Revenue: $46.2 billion (2019)
Last, but by no means least, there’s Deloitte—the biggest of the Big Four. Tyler Welmans, who leads Deloitte UK’s blockchain team, tells Decrypt that Deloitte does it all. “Deloitte operates across most parts of the business world,” he said. “Our role over the past five years really has been embedding capability that relates to blockchain and crypto assets, and all the different flavors of public and private blockchain that are out there.”
Deloitte has even dabbled with integrating blockchain into itself, allowing employees in Luxembourg to pay for canteen lunches with Bitcoin.
So, what does Deloitte do? First up is strategy consulting, the business of telling businesses how to do business with blockchain. Welmans and his team run a well-stocked software shop, helping out clients to implement blockchain projects, as well as integration and maintenance. Among the educational services offered in its “blockhain in a box” mobile demo platform, which communicates to clients the magic of the blockchain.
Next is tax advice—the standard Big Four stuff. “We have the kind of skills that can help companies that are dealing with crypto-assets interpret rules and regulations,” said Welmans. Niche specialist advice, like technical due diligence during corporate acquisitions, or audits of crypto companies, are also up for sale.
But much of Welmans’s role still revolves around education. ”We do find that there is still generally not a particularly strong level of understanding in comparison to some other technology trends,” he said.
However, Welmans argued, there’s a deeper understanding of the technology among specialists. Deloitte also acknowledges that educating clients is partly about “teaching them to focus on how they can benefit from using blockchain, rather than getting tied down trying to understand every technical or cryptographic detail around how exactly a blockchain works.”
“After all,” he added, “that’s what the specialists are for.”
In a June survey, Deloitte found that 55% of 1,488 senior executives in advanced economies considered blockchain “critical and in our top-five strategic priorities,” an increase of 12% compared to 2018. And 88% thought that it will “eventually achieve mainstream adoption,” an increase of 4% compared to 2018.
Newer startups, those that are “disruptors from the outset,” are more likely to try out radical financial services, such as those that operate under the umbrella of decentralized finance (DeFi), Welmans said. “The rate of innovation is phenomenal.”
However, for traditional financial services institutions, DeFi is still far too risky a proposition. “The level of risk that is associated with the current DeFi ecosystem is off the charts,” Welmans said. “I don’t think it’s likely that we’re going to see mainstream financial institutions embracing DeFi in the near term, purely because of the level of risk.” He added that while they may start exploring DeFi once the market “irons out its creases,” larger companies are predominantly still interested in “enterprise blockchains which permit greater control and risk management.”
China aims to let foreigners use digital yuan at Winter Olympics in 2022
China’s central bank is looking to enable foreign athletes and visitors to use the country’s digital currency during the Beijing Winter Olympics in 2022, according to a top central bank official.
Li Bo, deputy governor of the People’s Bank of China, said that the upcoming Winter Olympics could potentially become the first test of China’s central bank digital currency, or CBDC, by foreign users.
“For the upcoming Beijing Winter Olympics, we were trying to make e-CNY available not only to domestic users, but also to international athletes and like visitors,” Li said Sunday at a CNBC panel at the Boao Forum for Asia. The bank previously announced its plans on testing the digital yuan at the event in August 2020.
The official said that the PBoC doesn’t intend to replace the United States dollar’s dominance as the world’s reserve currency. Li reportedly noted that the central bank is focused on the domestic use of the digital yuan.
“For the internationalization of renminbi, we have said many times that it’s a natural process and our goal is not to replace the U.S. dollar or any other international currency. I think our goal is to allow the market to choose and to facilitate international trade and investment,” he stated.
Despite the PBoC’s focus on the domestic digital yuan, China’s central bank is still exploring cross-border CBDC use. “At the same time, working with our international partners. Hopefully, in the long term, we have a cross border solution as well,” Li said. At the forum, Li also said that China’s central bank now views the major cryptocurrency Bitcoin (BTC) as an “investment alternative.”
After launching its first domestic digital yuan tests in 2020, China started cross-border CBDC pilots in collaboration with central banks in Hong Kong, Thailand and the United Arab Emirates in February 2021. On April 1, PBoC director of research bureau Wang Xin announced that China’s central bank completed the first cross-border pilots of the digital yuan with the Hong Kong Monetary Authority.
Chinese authorities have stressed multiple times that the government is not seeking to replace existing fiat currencies including the U.S. dollar with the digital yuan. “We are not like Libra and we don’t have an ambition to replace existing currencies,” Zhou Xiaochuan, the president of the Chinese Finance Association and former PBoC governor, said in late 2020.
As previously reported by Cointelegraph, the U.S. has taken a careful approach toward CBDCs due to the U.S. dollar’s status of the world’s reserve currency and other CBDC-related challenges like privacy. The European Central Bank is also still deciding whether Europe needs a digital euro, with ECB President Christine Lagarde expecting the digital currency to be adopted in four years, at the earliest.
UK government establishes central bank digital currency task force
Her Majesty’s Treasury and the Bank of England have begun preliminary central bank digital currency studies that could result in the creation of a national digital currency.
In a document published by HM Treasury, the exchequer announced the creation of a CBDC taskforce in collaboration with the U.K.’s central bank.
Jon Cunliffe, deputy governor of the Bank of England and Katharine Braddick, director general of financial services at HM Treasury will co-chair the task force.
According to the terms of reference document, the task force will synergize the efforts of all relevant statutory bodies in the U.K. regarding CBDC development.
As part of its duties, the task force will explore preliminary issues associated with the design, implementation, and operation of a CBDC in the U.K. The task force will also interface with stakeholders across academia, fintech and other relevant industries to identify the technological hurdles involved in creating a sovereign digital currency.
The joint HM Treasury and BoE task force will also monitor CBDC-related developments on the international scene especially as other nations are actively exploring their own central bank digital currency projects.
According to a BoE press release issued on Monday, the central bank will also run its own internal CBDC unit headed by Jon Cunliffe.
The establishment of the task force is yet another indication of the U.K. government’s focus on digital currencies and fintech in the aftermath of Brexit. In November 2020, Rishi Sunak, chancellor of the Exchequer said that Brexit offered an opportunity for the U.K. to revamp its financial services sector.
Since Brexit, Sunak has overseen a significant policy shift towards harnessing novel fintech innovations like CBDC and stablecoins. As previously reported by Cointelegraph, U.K. financial services minister John Glen has identified stablecoin regulations as the major focus of the government in the area of cryptocurrency regulations.
According to a report by Reuters, the U.K.’s financial market focus is also extending towards distributed ledger technology firms. Speaking during a financial industry conference on Monday, Sunak announced that the government plans to establish a fintech sandbox for blockchain startups.
China ‘endorses’ BTC investment: 5 things to watch in Bitcoin this week
Bitcoin (BTC) is beginning a new week grinding back to $60,000 as the shock of a weekend price crash settles.
After dropping to as low as $52,000 in a snap sell-off event, Bitcoin has spent the past two days slowly recovering its losses. What’s next?
Cointelegraph presents five factors to consider as a new trading week gets underway and cryptocurrency holders across the board nurse their wounds.
Stocks primed for “up only” short term
The macro picture is fairly stable in Asia and Europe, with United States markets yet to open.
A mixed picture greeted investors at the open, but volatility has been broadly absent, with only oil showing signs of more pronounced weakness.
As such, little impact on Bitcoin is to be expected from equities moves, these forecast to continue building on record highs in the coming weeks.
Russel Chesler, head of investments and capital markets at the Australian branch of crypto-friendly investment manager VanEck, captured the mood in a note quoted by Bloomberg.
“Our current view is that with short-term interest rates set to remain low for the medium term and our expectation that earnings will continue to increase, it is unlikely that the increase in long-term interest rates will trigger an equity market fall,” he wrote.
Coronavirus concerns still linger despite stocks’ relentless surge higher, with more reported official cases last week than ever before worldwide.
Economic responses continue to vary, with a patchwork of openings and closings characterizing countries’ latest attempts to control the outbreak.
Bitcoin recovers from $52,000 crash
In Bitcoin circles, the main talking point naturally remains the weekend’s events, which saw a sudden cascade of selling send BTC/USD down by $7,000 in a matter of minutes.
Bouncing at just above $52,000, the crash echoed several similar events this year, and Bitcoin managed to regain around 50% of its lost ground within hours.
Responses, however, are split between those who consider the volatility “business as usual” and more conservative voices calling time on the latest bull run.
As Cointelegraph reported, suspicions are focusing on a Chinese power blackout hitting hash rate, as well as rumored legal action by U.S. regulators against unnamed financial institutions related to money laundering.
In his own breakdown of what happened, popular statistician Willy Woo highlighted both China and skittish moves by futures investors as contributing to the losses.
“We just saw the single largest 1-day drop in mining hash rate since Nov 2017. The hash rate on the network essentially halved, causing mayhem in BTC price as it crashed,” he told Twitter followers.
In a sign that the future could see fresh sustained upside, Woo reiterated the “reset” in an on-chain metric, the spent transaction output ratio (SOPR), showing that long-term investors will likely soon stop selling altogether.
“The on-chain SOPR metric near a full reset. A classic buy the dip signal,” he added.
“In simple terms, profit taking by longer term investors is completing, very little sell power left unless investors want to sell at a loss from their entry price. Unlikely in a bull market.”
Fundamentals point higher
It’s not just SOPR — a whole range of Bitcoin network indicators and fundamentals are buoying bulls’ cause, even as BTC/USD remains below even February’s high of $58,300.
For Woo and others, particularly important are the transfer of funds to investors who have traditionally hodled, not sold — another classic trait of Bitcoin’s rise in recent months.
“Serious strong-handed holders are buying this dip. In the last 24 hours, over 200,000 Bitcoin became illiquid, a 3-year record,” fellow analyst William Clemente added Sunday.
“This illiquid supply increase is not only just dip buyers with no history of selling, but partially accumulation from 5-6 months ago of which those wallets have just crossed the ‘illiquid’ threshold for this metric.”
Lastly, around 13.5% of the total available Bitcoin supply has been active above $53,000, something which Woo says is confirming its status as a trillion-dollar asset. At around $53,800, Bitcoin’s market cap becomes a solid $1 trillion.
“This dip happened while unprecedented numbers of new users are arriving onto the network per day. There’s been a retail influx in the last 2-3 weeks,” Woo additionally noted, with total wallet numbers nearing 10 million.
Difficulty takes care of miner woes
A closer look at hash rate, which at one point dipped by almost half, shows that a recovery in line with price is underway.
According to rough estimates from on-chain monitoring resource Blockchain, Bitcoin network hash rate is already back above 150 exahashes per second (EH/s), having broken through the 200 EH/s barrier for the first time in history last week.
Miners leaving the network due to power problems leads to Bitcoin’s network difficulty decreasing to incentivize more to come online.
Further confirmation that the weekend’s issue was firmly temporary comes from difficulty forecasts — in two weeks’ time, when it next adjusts, difficulty will only drop by around 4%, a modest move which could yet be cancelled out altogether as miners return.
This balance between hash rate and difficulty is arguably the most important aspect of Bitcoin, one which allows it to govern itself and preserve security and functionality regardless of sudden events impacting network participants.
Chinese central bank praises Bitcoin and stablecoins
In another unanticipated event which is arguably yet to be fully appreciated by the market, China has given an unprecedented stamp of approval to cryptocurrency as an “investment alternative.”
Speaking at a conference organized by CNBC, Li Bo, deputy governor of China’s central bank, the People’s Bank of China (PBoC), broke ranks to validate both Bitcoin and stablecoins.
“We regard Bitcoin and stablecoin as crypto assets… These are investment alternatives,” he said.
The comments are surprising as despite being a center for Bitcoin mining activity, China has had a blanket ban in place on trading and transacting in cryptocurrencies since September 2017.
“Every country that bans Bitcoin eventually reverses that ban. You simply cannot be competitive in the 21st century economy without it,” Charles Edwards, founder of investment firm Capriole, responded.
“China is playing 4D chess. The last 3 days have made very clear they still dominate global mining. Slowly, slowly then all at once.”
The market barely reacted to this high-level affirmation of Bitcoin’s long-term potential. At the time of writing, Bitcoin is still hovering at $57,000, as yet failing to see an attack of familiar resistance levels.
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