We help you to seize the opportunities of crypto while managing the risks
Bitcoin, cryptocurrency, blockchain... So what does it all mean?
The rapid rise of crypto is changing the global financial landscape forever, creating both risks and opportunities for new and existing players. Underpinned by blockchain or “distributed ledger” technology, crypto disrupts traditional business models by removing the need for trusted intermediaries. The explosive expansion in crypto applications now under way marks the start of a revolution that no organisation can afford to ignore.
Today’s most visible and high-profile application of crypto is in the form of cryptocurrencies. But that’s just the tip of the crypto iceberg. From the purchase and sale of digital assets traded on crypto exchanges with a market cap in excess of USD 1 trillion, to the use of non-fungible tokens (NFTs) for music releases, and from automation of insurance by means of smart contracts to central banks developing their own digital currencies, the momentum behind crypto is rapidly growing. Over the coming years, its impacts will reach into virtually every area of life and business.
But what are crypto’s implications for your organisation? How can you seize the opportunities it offers while being aware of the risks?
Blockchain technology and crypto applications create significant opportunities throughout the value chain. Entirely new asset classes, tokenisation and increased liquidity of existing and previously illiquid assets, efficient transactions and settlement, are but a few of the use cases. Blockchain reduces the need for a trusted intermediary. How do you take advantage of the opportunities and mitigate the threats this new technology brings?
We have a role to play in the development of the crypto ecosystem. PwC has put together a one-stop shop offering drawing on crypto services from across our lines of services. Our goal is to service your needs in the best possible way to allow you to focus on your business.
We have a broad range of experience supporting our clients becoming VASPs, Custodians, tokenizing assets, developing platforms to mint NFTs as well as building their own metaverse. We support both traditional financial services companies as well as new market entrants and FinTechs looking to leverage this technology to disrupt the market. Below outlines a typical roadmap for our clients and examples of the support that we can provide along the journey.
"By rethinking their business model and adopting new technologies, companies can develop and establish new services and products to create lasting competitive advantage and enormous value for the business and their stakeholders."
We have an extensive external network within the Swiss crypto market. We’re active in the Crypto Valley Association and support clients throughout the value chain: technology, exchange platforms, custodial and financial services firms as well as token issuance vehicles. In addition to the advisory offering, PwC Switzerland is a one-stop shop for crypto, providing assurance, tax and legal expertise under one-roof, as well as being able to offer global expertise and the latest market insights by leveraging the scale of the partnership.
"Blockchain and crypto has enormous potential to completely reshape the financial services industries, as well as many others. Through targeted investment and a clear understanding of how you can leverage these transformational changes and manage regulatory risks, you can help avoid the same mistakes as Betamax and Blockbuster!"
PwC is an Ecosystem Network Partner to CV Labs. Through our partnership we cooperate with CV Labs to provide thought leadership for events, co-author the Global Top 50 report and contribute to the CV Labs Incubator Program.
Trusted Key Ceremony Guidelines: We joined Crypto Valley Association’s cybersecurity working group and took part in creating the new guidelines on trusted key ceremony best practices. These guidelines aim to improve awareness of the importance of protecting digital assets safely and securely.
Distributed ledger technologies enable an environment where there is:
Proof of stake and proof of work are both consensus mechanisms used by blockchain networks to achieve distributed consensus.
Proof of work requires “miners” to solve a complex mathematical problem and then order transactions and create new blocks such that the nodes in the network can agree on the state of the network.
Proof of stake requires users to “stake” their coins to become “validators”, which perform the same function as “miners” without the need to perform solve a complex mathematical problem.
Proof of stake has several advantages over the proof-of-work system, including:
DLT or distributed ledger technology is a database distributed on different nodes or computer devices which individually participate in the network by replicating and saving a copy of the ledger. There is no central authority, no intermediary, and each node works independently. Data is verified by consensus.
Blockchain is basically a special form of DLT. Similar to DLT, blockchain is managed by peer-to-peer networks; it can exist without any central authority and instead uses a consensus algorithm to validate transactions before proceeding with an update of the database. But what makes the blockchain unique compared with other DLTs is the grouping and organisation of validated information into blocks. It is the blocks that are connected to each other and protected by encryption. Blocks are continuously added to the chain, only allowing data to be added to new blocks connected to preceding blocks on the distributed database.
Smart contracts, sometimes referred to as “programmable money”, are self-executable pieces of code built into the coin itself. The simplest case of a smart contract would be the digital replacement of an escrow agent. Here, a smart contract which self‑executes payments based on some pre‑defined criteria (e.g. the transfer of change of ownership in a land registry to the buyer). Smart contracts can also be integrated with the internet of things.
The benefits of smart contracts stem from their programable nature, making them fast, automated and not prone to random errors. Further, their blockchain nature ensures that they are transparent and secure, removing the need for trust between the contracting parties.
The term crypto wallet is something of a misnomer, as crypto wallets do not actually contain crypto currency. Instead, the crypto currency remains on the blockchain and can only be accessed using the private key. It is this private key that is stored in the crypto wallet. Crypto wallets might therefore be more aptly named “private keyrings”.
In general, crypto wallets have public and private keys:
Director, Blockchain, DLT and Token Business Advisory Lead, PwC Switzerland
Tel: +41 79 549 0759