Decrypt’s Art, Fashion, and Entertainment Hub.
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.
Learn about the four key building blocks for institutional grade crypto custody that will allow your organization to be best positioned to seize the incredible opportunity in the custody space. https://t.co/XxyoUueYdg #cryptocurrency #cryptoasset #blockchain
— KPMG US (@KPMG_US) March 17, 2020
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.”
Did you know #data integrity is a top reason businesses consider using #blockchain? Find out how EY OpsChain allows organizations to interact seamlessly, securely & privately with partners without sacrificing their data: https://t.co/9kkTNkNH4E https://t.co/z18cPONiik
— EY (@EYnews) December 17, 2019
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.”