Yuval Rooz’s Post

I'm still digesting the wealth of insights from the recent FinTech Connect conference. The simultaneous transformations in Web3, crypto, AI, etc are driving rapid change in the industry and it's inspiring to observe. Some of the key takeaways from the speeches and panels: • The paper-based ID system is Victorian. We're moving to a digital world and need to own our data. Anti-money laundering (AML) and know-your-customer (KYC) processes should be digital and real time. • It's important to avoid a single point of failure and balance unified digital IDs with data privacy. Zk proofs can secure decentralized, self-sovereign digital IDs by validating credentials without revealing sensitive data. • The financial system is navigating the emergence of central bank digital currencies (CBDCs), stablecoins, commercial bank money tokens and tokenised deposits and it's not yet clear what the balance will be. • There's more visible movement on wholesale CBDCs than public because of concerns about privacy and control over citizens. • Adoption of tokenised bank deposits is happening for real-time payment and settlement on blockchains when funds need to move across borders and complex webs of intermediaries. • If every commercial bank has a token, then public permissioned, public permissionless and private ledgers need standardisation to interoperate. • Digital wallets containing secure digital IDs may be the killer app for blockchain/Web3 and will facilitate public CBDCs. • Regulation will need to standardise digital IDs, give banks the right to issue digital cash and move CBDCs at scale. • How a CBDC looks at launch is not how it will look down the line. Money evolves and we have to evolve with it. • Layer 1 public blockchains are becoming safer and more scalable. But blockchain is not a solution to everything. • Blockhain will become mainstream when we're no longer talking about it. When we shop we don't think about the underlying payment infrastructure. • With so much rapid change fintech startups should maintain a flexible cloud tech stack, so they can swap out as needed without entrenched long-term partners. • Financial services firms shifted to becoming tech firms and now AI firms. Banks have always had data but they don't know what to do with it. Data is the fuel of AI. • AI-enhanced banking products are challenging to introduce, but banks and fintechs already use it in operations, e.g. fraud detection and personalised customer analysis. AI is just a new tool in the arsenal. • One of the most important things about innovation is the context and understanding of the why. As you can see, there was so much to digest! You can read my coverage of the conference for Techopedia here: https://lnkd.in/ehTeUyHy https://lnkd.in/ehqyXUvD

Insights from the recent Citi report - Securities Services Evolution 2023 by Okan Pekin and team. Survey covers industry transition to T+1 and beyond. Includes focus on DLT / digital assets engagement. (Of the nearly 500 respondents: more than half of the respondents were banks (53%), with 42% of the respondents operating in North America). - 2022 “marked a shift in the parallel evolutions of digital assets (including cryptocurrencies) and DLT-based projects (including tokenization).... With speeds and directions of development varying by region, the net effect appears to be a slowing in the global momentum around digital assets, with only 32% of firms now in build-out phase (predominantly in Europe), compared with 44% of respondents working on DLT and tokens.” DLT / Digital Assets Engagement: - 74% of respondents are engaged in distributed ledger technology (DLT) and digital asset initiatives) – up from 47% in 2022 - 79% of respondents see their core growth as coming from tokenization   Industry increasingly bullish on expectations of digital cash being operational w/i five years - 87% of market participants view digital money as viable by 2026 (vs. 72% in 2022)) - 52% expect CBDCs to be live within three years YET >1/3 exploring alt solutions w/i the next three years: - 27% bank issued stablecoins (vs. 17% in 2022) - 8% non-bank issued stablecoins (vs. 6% in 2022) Top impediments to widespread use, including: 51%: regulatory uncertainty around governance, legal and risk aspects 42%: formation of market-wide ecosystems around a solution 38%: connectivity to legacy technology platforms (internally) 30%: Vendors’ ability to scale to deliver market-wide solutions 29%: Interoperability of different blockchains Quotable: - Phase II benefits of DLT and digital assets “underdeveloped” – “Moving from simple ‘electronification' of securities to producing securities that behave and trade entirely differently, can open up a new line of benefits for treasurers and portfolio managers especially.” - “Based on growing awareness that DLT is not a silver bullet, and that it may be harder to put everything on a blockchain, there is an increasing focus on where DLT can play a unique role. Industry practice so far indicates that this unique territory is most often in the registry and data-layer.” - “(T)he connectivity of our digital platforms to our core infrastructures is a central problem for around one in every seven firms. Most often manifest in core banking and treasury systems, the central question is how to reflect and manage digital assets (and balances) alongside traditional ones in systems that may be up to 40 years old.” Link: https://lnkd.in/eDGCw_vq

Another eventful week in the industry. Each week we see further adoption of blockchain technology from institutions. J.P. Morgan announced its stablecoin, JPM, handles over $1bn worth of transactions every day. Euroclear showcased its digital securities issuance offering (D-SI) after the The World Bank issued Euroclear a €100m digital bond. Deutsche Bank and Standard Chartered partnered up to create its first proof of concept on the Universal Digital Payments Network. Stay informed with the Weekly Appold Market Watch. #blockchain #crypto #changeiscoming

Appold Market Watch   Market Update & Industry News - Week ending 27 October 2023   🔷 J.P. Morgan reported that its own Stablecoin, JPM Coin, now handles $1bn worth of transactions daily with plans to widen its usage. The JPM Coin has been applied as a settlement layer for some of its clients when making payments across jurisdictions. The blockchain network allows for significant cost savings and much faster settlements compared to traditional processes. Expect more launches of Stablecoins in permissioned networks from institutions and corporations in the future, along with Sovereign issues in the form of Central Bank Digital Currencies (CBDC). 🔷 Following UK Government legislators filing the Economic Crime and Corporate Transparency Bill (ECCT) last year, it passed Royal Assent last week. The filing and approval will allow authorities to freeze and seize digital assets if they are suspected of being used illegally. This powerful Bill also allows digital assets used in crime and illegal activities to be recovered without conviction, allowing lawmakers to respond quicker to suspending and recovering assets.  🔷 European clearing house, Euroclear, announced the launch of a Distributed Ledger Technology (DLT) solution for the issuance of digital securities. The service will enable the issuance, distribution and settlement of digital securities. The process was demonstrated with a World Bank issuance of €100m and listed on the Luxembourg Stock Exchange. Citi’s Issuer Services acted as the issuing and paying agent, TD Securities as the dealer, and Euroclear Bank as the issuer Central Securities Depository. 🔷 Deutsche Bank and Standard Chartered's FinTech and venture arm, SC Ventures, have announced the successful completion of their first Proof-of-Concept (PoC) on GFT Technologies Universal Digital Payments Network (UDPN). The UDPN is an interoperable payment infrastructure that can facilitate government-approved digital currency systems, encompassing regulated stablecoins and Central Bank Digital Currencies (CBDCs). The collaboration enables real-time transfer and swap test transactions between EURS and USDC Stablecoins on the infrastructure. 🔷 Since the recent change in legislation, the UK’s regulator (the FCA) has reported three common issues with the crypotasset financial promotions which include: Promotions making claims about the ‘safety’, ‘security’, or ease of using cryptoasset services without highlighting the risk involved. Risk warnings not being visible enough due to small fonts, hard-to-read colouring or non-prominent positioning. Firms are failing to provide customers with adequate information on the risks associated with specific products being promoted. The enforcement of the new regulations has caused some exchanges to exit the UK having been unable or unwilling to meet the obligations with around 221 alerts being issued where failures to comply have occurred. #marketwatch #marketinsights #blockchain #investments

🌎 The Dencun upgrade last week means chains within the Optimism ecosystem are running well below one penny per transaction. Highly secure and incredibly fast settlement like this is something countries launching/researching CBDCs and looking at cheap blockspace overall may take more seriously in 2024... 1) Finance ▪ Last call-out within Finance, Nation States as a whole is a narrative that may not get the highest amount of attention in 2024 but will be one to watch this year and next. Here are some high-level details on the fifth sub-vertical I'll be following: 1.5) Nation States ▪ With the 2024 US election on the horizon, the real window for regulation to happen will be in H1 of 2024. We are halfway there and there is little to no progress. ▪Those close to US federal legislators do not see anything happening at all this year, as it is a sensitive topic that most do not want to be exposed to with the upcoming elections. ▪ With Patrick McHenry (crypto-advocate and chairman of the House Financial Services committee) stepping down, the most likely time for US regulation will be in 2025, contingent on the presidency and other macro events. ▪ Thus, outside of a potential ETH ETF (which may or may not include staking) being approved by the SEC in June/July of this year, the primary regulatory landscape to look at is in Europe (MiCA coming on line with Titles III and IV in June of this year), and markets around the world that have already shown positive signs towards crypto regulation (ex: Singapore, Japan, Brazil, etc.) or those who are in high need of the store of value of USD-based stablecoins.  ▪ Tracking CBDCs and their deployment, along with Nation State IDs will be interesting narratives to track this year within this sub-vertical (as mentioned in more detail in the Stablecoin narrative). If you're at the federal, or even state/city, level in a country that is looking at using secure, yet cost effective blockspace, send me a message. Very eager to see more countries adopt L2 (layer 2) roll ups. Variety of Nation States with Clearer Regulatory Guidance and/or Appetite Latam | Argentina, El Salvador; Asia | Singapore, Taiwan, Hong Kong, South Korea, Japan; Europe | UK, MiCA participants; North America | Canada; Africa | Nigeria, Ghana, Senegal, South Africa; Middle East | UAE, Dubai Sources - CBDC Tracker: https://lnkd.in/grczDq6z - Country Specific Exploration | Norway: https://bit.ly/43n3hPa - MiCA Titles III and IV: https://lnkd.in/eMnnAHrp - Crypto Regulation Tracker: https://bit.ly/3TfxzP6 Overview 1) Finance 1.1) Stablecoins: https://bit.ly/3V8awZc 1.2) DeFi: https://bit.ly/3TcyiR8 1.3) TradFi/Fintechs: https://bit.ly/3IUC8Kh 1.4) RWA & Tokenization: https://bit.ly/4cmTzQR #ethereum #optimism #cbdc #stablecoins #blockchain #dencun #4844

🔍 It is interesting to hear your #opinion – about the core benefits of the proposed architecture of Bank of Israel- https://lnkd.in/dwbhXUWD   🔸  does the digital shekel model proposed here has any added value for the end user? (individuals, businesses, etc.).   🔸  is it more environmentally friendly compared to existing payment methods?   🔸  does it foster greater security and credibility?   🔸 is it safer against counterfeit, thefts, and AI and quantum computing attacks, compared to the existing system?   🔸 does it reduce barriers to asset access, enabling investment opportunities previously out of reach?   🔸  does it meet the users' needs for privacy, without being an enabler of illicit activity - more adequately than the existing systems?   🔸 Does it enhanced transparency, efficiency?   🔸 does it offer faster transactions, reduced fees, enhanced user experiences, functionalities and use cases that are not available today?   👉 And generally speaking:    💡 how will the citizens benefit from this expensive system? 💡 does it solve real-world problems? 💡 does it improve people’s lives? 💡 does it promote a more inclusive society? 💡 does it contribute to a more sustainable planet for the future?   The above queries are relevant also for the models of the European Central Bank, Bank of England and the Sveriges riksbank. 🚨 p.s. just for full disclosure: I am not part of the 'automatic' opponents to CBDC... On the contrary, I was leading the design and testing of the first ever retail CBDC, that passed banking stress tests.... I am advocating CBDC (or stablecoins) which enables very fast bilateral transactions with no intermediaries, with lower #environmental footprint🌿🌐 , which is already NOW #quantum-safe, enabling privacy by design, being Harassment-Resistant that will gain public #trust, by avoiding surveillance and censorship, by preserving #cash-like #privacy when two parties (human or devices) trade with digital money, by everyone, everywhere, anytime, and that offers disruptive use cases that does not exist today with prevailing #payments protocols. ✍️ Please comment and/or share!   🤝 Join us - 👇 📲 The Digital Shekel Foundation (a.k.a. Digital Tokenization Think-Tank),     shaping the future of money 🛠️ https://lnkd.in/db32iGgw #trends #payment #alternativepaymentmethods #globalpayments #technology #quantum #Internetofthings #nano #micro #cbdc #stablecoins #tokenization Amir Yaron Oded Salomy Ilanit Adesman Shani Galant-Frankfurt🎗️ Gal L. Esti Hadar Chaim Friedland Ariel Yosefi Gil White Yoav Soffer 

🌍 Is Europe's DLT Pilot Regime stuck in regulatory limbo? 🕰️ In the heart of Europe's financial landscape, a pressing question echoes: why has EU's DLT Pilot Regime yet to receive authorization since its inception on March 23, 2023? Dr. Alexandra Andhov's Forbes report delves into the challenges of the regulatory project allowing Distributed Ledger Technology (DLT) for trading securities. An update letter from the European Securities and Markets Authority (ESMA) to the European Commission highlights potential hurdles. This sparks a vital inquiry: does the current reality meet the regime's goal of advancing DLT innovation?📈 Here's all you need to know: 💡  Innovative cash settlement solutions hit a roadblock due to the absence of central bank digital currencies. Delays in #MiCA authorizations add complexity, making it harder to find suitable cash leg providers. Clarity on e-money tokens and custody services is essential to move forward. 🔒 Clearer guidelines are needed for self-hosted wallets under the DLT Pilot Regime. Regulatory expectations should be defined to prevent conflicts with existing frameworks, especially regarding custody services and entity roles. This clarity is crucial for building trust and efficiency in DLT market infrastructures. 🔗 Interoperability remains a major hurdle for DLT operators within traditional market infrastructures and #DLT platforms. Technical and operational complexities hinder seamless integration, affecting accessibility and efficiency. Addressing these challenges is vital for creating a more interconnected financial ecosystem. 💼 The DLT Pilot Regime introduces special investor protection measures, especially for retail access and regulatory compliance. Clear guidance and consistent implementation are essential to safeguard interests and foster innovation within DLT infrastructures. Balancing accessibility and protection is key for trust in emerging technologies. 🌐 Uncertainty about the DLT Pilot Regime's duration and thresholds undermines global competitiveness. More clarity and flexibility are needed to attract applicants and ensure adequate time for project implementation. Public assurance of the regime's extension is crucial for confidence and investment in DLT-based market solutions. 🔄 The current regulatory framework favors established entities and hinders new entrants. Cash settlement benefits existing banks, the pilot regime limits transactions to 'simple' financial instruments, and low volume thresholds hamper new entrants' ROI. To foster an inclusive DLT environment, clear objectives and incentivizing change are crucial. Simplifying processes, allowing innovative financial instruments with DLT, and raising pilot regime thresholds are vital. Without these changes, the pilot regulation may maintain the status quo. 🌟 Keep an eye out for further insights as we explore pioneering #tech shaping #finance and the internet of the #future. Explore the full article👇 https://shorturl.at/ObPW6

🚨 BIS Innovation Hub announces first six projects for 2024 🚨 The Bank for International Settlements (BIS) today announced six new projects in its 2024 Innovation Hub work programme, including experimentations on cyber security, fighting financial crime, central bank digital currencies (CBDCs) and green finance. 📢 New projects 📢 🔴 Project Leap 🗺 from the Eurosystem Centre Starts phase II, aiming to "quantum-proof" payment systems. Will show how a payment system can be protected from the potential threat of quantum computers, which may be able to break the encryption systems used to protect financial transactions. 🔴 Project Symbiosis 🗺from the Hong Kong Centre Will test the use of AI and big data technologies for supply chain disclosure and adaptation. Seeks to improve the tracking of Scope 3 emissions by working with private sector and civil society organisations in creating AI-supported methodologies for emissions disclosures by small and medium-sized companies. 🔴 Project Aurum 🗺From the Hong Kong Centre Enters a new phase - will study the privacy of payments in retail CBDCs. Will leverage expertise from academia and privacy regulators to advance central banks' understanding of privacy in the design of CBDC systems. 🔴 Project NGFS Data Directory 2.0  🗺Led by the Singapore Centre Will rebuild the data directory platform of the Network for Greening the Financial System. While the directory's first version was built to systematically identify and map climate-related data gaps, the revised version will aim to facilitate searching and browsing through data sources, making the directory more usable as a public resource. 🔴 Project Promissa (recently started) 🗺Swiss National Bank and the World Bank Group, with the International Monetary Fund as observer. Tests the feasibility of tokenising promissory notes, financial instruments that help fund multilateral development banks and other international financial institutions. In many cases, these are still paper-based. The project will use distributed ledger technology to simplify their management and transparency. 🔴 Project Hertha 🗺Launched by the London Centre Aims to test the use of network analytics to help identify financial crime patterns in payment systems. Will map current and emerging financial crime typologies in real-time payment systems, drawing on lessons from instant payment systems and digital asset networks. These will be added to existing projects that various Innovation Hub Centres will continue to develop this year. As always, I'd love to hear your thoughts 👉 #bis #tokenization #tokenisation #innovation #blockchain #cbdc #quantumcomputing #ai #bigdata #privacy