Crypto market is maturing, KPMG says

The crypto and blockchain sector continues to show signs of maturity, despite global and ecosystem challenges, audit, tax and professional services firm KPMG said in its September report Pulse of Fintech H1’22 .

Although declining as of 2021, crypto’s continued growth pace “highlights the growing maturity of the space and the breadth of technologies and solutions attracting investment,” KPMG said.

With global instability surrounding the conflict in Ukraine and echoes of the recent collapse of stablecoin TerraUSD still resonating, the blockchain ecosystem has seen its fair share of hurdles this year. However, despite these events, KPMG said investor sentiment remains strong, with an average level of mid-year investment well above that of years prior to 2021, despite a $32.1 billion decline in 2021 to $14.2 billion in 2022.

However, the waters may still be choppy for some blockchain startups, which Alexandre Stachtchenko, director of Blockchain and Crypto Assets at KPMG France, may need to cut valuations to raise funds because it is the only option. “Of course, some cryptos will die out, especially those that don’t have clear and solid value propositions. This could actually be quite healthy from an ecosystem perspective, as it will eliminate some of the mess created in the euphoria of a bull market. The best companies will be the ones that survive,” he said.

Surviving companies continue to drive interest in the blockchain space and raise venture capital with large share increases from Germany-based Trade Republic to $1.1 billion, US-based FTX Bahamas at $500 million and ConsenSys at $450 million.

Other takeaways

The face of crypto investors is changing dynamically from retail investors to institutional and commercial players who make up a growing share of capital inflows. As such, from an investment risk perspective, crypto assets are beginning to bear similarities to traditional assets, KPMG said in its report.

Since El Salvador and the Central African Republic adopted bitcoin as legal tender, the report indicates that there is a growing interest in sovereign applications of cryptocurrencies among developing countries, as opposed to that of existing currencies such as the US dollar.

Although a ban on crypto trading is in effect in China and there are indications that India may follow suit, regulators in other jurisdictions are more interested in fostering competition, evolution and the growth of crypto markets while protecting consumers, KPMG said. Additionally, the EU will adopt new regulations for the cryptocurrency industry at the end of 2022.

Expect increased interest in stablecoins. Firms are considering stablecoins to better leverage the operational benefits of crypto, including reduced costs and delays, increased visibility, faster liquidity and greater ease of use, KPMG said.

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