Digital Assets for Financial Services

Wherever opportunities present themselves, risks aren’t far behind. That is especially true in the digital assets space, as capabilities, industry standards and the competitive landscape are evolving swiftly. To avoid potential pitfalls, firms require robust governance and control frameworks that remain flexible enough to adapt to that rapid pace. PwC’s services span the risk management lifecycle, from performing initial risk assessments, identifying control gaps and developing risk mitigation strategies to Service Organization Control (SOC) 1 and SOC 2 readiness assessments.

Digital asset market participants face a complex set of existing and emerging rules and legislation — and all roads are leading toward additional scrutiny. PwC’s multidisciplinary team, comprised of industry experts, former regulators and technical specialists, can assist in forming a compliance framework and strategy that enables firms to stay ahead of the regulatory curve. Our clients benefit from our extensive experience in establishing KYC, AML and SOX readiness, licensing and approval, and regulatory exam preparation, response and remediation. In select jurisdictions, our qualified lawyers are available to assist you with the creation of fit-for-purpose legal frameworks, legal structuring, legal documentation drafting (including client facing and transactional documentation) and IP/employment advisory.

The shift toward decentralized finance further exacerbates concerns over cyber security. In an environment that requires less and less physical interaction between counterparties or customers and increasingly relies on digitally automated services, firms are challenged to secure a growing attack surface as their digital footprint grows. Our clients benefit from PwC’s depth and experience working with large and complex financial institutions on vulnerability assessments, penetration testing and incident response, employing approaches that seek to enhance cost optimization and preserve digital agility. 

Digital assets are a new and rapidly evolving asset class, with several characteristics that make them unique from a taxation perspective. Existing rules have not typically been developed with digital assets in mind. PwC’s approach helps clients understand the tax consequences of their digital asset strategy and activities, including the characterization of asset classes, transfer pricing implications and reporting requirements. Armed with that understanding, our clients are able to refine their tax strategy and make informed structuring decisions that take into account differences between jurisdictions and evolving regulatory guidance.

Traditional finance players may look to M&A as a means of acquiring talent, technology or entire businesses to accelerate the build out of digital asset capabilities, while existing crypto companies with strong balance sheets evaluate opportunities to buy out ailing competitors. And even amid uncertain market conditions, continued technical innovation of crypto and blockchain native entrepreneurs and companies will drive further fundraising activity. PwC has a proven track record of providing M&A support, valuation and due diligence, and IPO readiness services to market participants in the digital asset ecosystem. 

Accounting for and auditing of digital assets can be complex. Practices and regulatory guidance surrounding asset classification, measurement requirements, fair value considerations, disclosures and 3 other issues continue to evolve. As financial institutions, corporates and consumers opt in to this nascent, but rapidly expanding industry, the need to build trust and instill investor confidence into a transformed financial system will increase. Our capabilities range from performing financial statements and ICFR audits, to assisting clients in the refinement of existing accounting policies — or establishing new ones where required.