Internal Audit for the on-chain era
Digital assets are moving deeper into institutional banking, reshaping where risks sit and how they appear. Explore how Internal Audit can evolve its coverage, controls and capabilities for the on-chain era.
Prepare Internal Audit for the on-chain era
Explore the risks, controls and audit considerations shaping digital assets in banking.
The window to prepare is closing
Stablecoins, tokenized deposits, on-chain payments and custody are changing banking infrastructure and the operational, compliance and risk considerations that come with it.
As regulatory frameworks evolve and adoption expands, Internal Audit should understand how digital assets affect the risk universe, existing controls and audit coverage.
“Digital assets don’t replace the risks banks already know, they change where those risks sit and how they show up.”
Paul Heidler
Managing Director Internal Audit & Controls Digital Asset Leader, KPMG LLP
Where should Internal Audit focus?
Stablecoin issuance
Payments and settlement
Tokenized deposits and interbank clearing
Custody
Trading and brokerage
Tokenization of real-world assets
Following the digital asset payment lifecycle
Digital asset payments introduce control considerations across the transaction lifecycle, from customer onboarding through on-chain execution, reconciliation and payout.
Lifecycle graphic
New infrastructure. New risk considerations.
On-chain activity changes several assumptions embedded in traditional banking controls. Internal Audit should consider risks related to transaction finality, wallet and key management, continuous operations, financial crimes, third-party dependencies and internal skillsets.
Cross-cutting areas include:
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Callout Outsourcing does not transfer accountability. Banks remain accountable for digital asset activities performed by third parties.
A four-step blueprint for modernization
Internal Audit leaders can consider four actions as they prepare for digital asset operations:
Map activities across products, entities, technology platforms, third parties and shared networks.
Assess risks by use case and lifecycle stage, including third-party and on-chain dependencies.
Build technical fluency and enhance testing capabilities for emerging digital asset risks.
Align audit coverage with the institution’s planned and implemented digital asset use cases.
How KPMG can help
KPMG combines banking knowledge with digital asset specialists to help Internal Audit functions address emerging risks, coverage needs and capability gaps.
Areas of support
- Enterprise and audit risk assessment
- Co-source and loan-staff support
- Audit scoping and plan design
- Digital asset audit outsourcing
- Vendor, custodian and consortia audits
- Regulatory readiness and exam support
- Specialized digital asset support
Prepare Internal Audit for the on-chain era
Explore the risks, controls and audit considerations shaping digital assets in banking.
The Future of Internal Audit
Manage disruption while building stakeholder trust
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