Snippings

A Grant Thornton study in the UK found that the the main regtech solutions that regulated firms are looking to buy over the next 12 months are financial crime, horizon scanning, governance risk and compliance, regulatory reporting and regulatory risk calculations.

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SardineX will offer a shared database where industry-wide participants can access fraud or compliance-related data on any entity that transacts across financial services.

From Sardine Launches Industry-Wide Consortium to Curb The Rapid Rise of Payment Fraud | Business Wire:

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The European Central Bank (ECB) kicked off 2024 ny annoucing that it intended to award more than a billion euros in contracts for private sector partners to heklp to develop a digital euro. The procurment will run across five separate initiatives with half of the money going to the developing an offline solution, which is clearly critical for a mass market alternative to physical cash. How exactly an offline solution will work is complicated and dependent on requirements. The current draft of the digital euro legislation, for example, says that offline digital euro payment transactions will have a higher level of privacy than online payments (I do not know why) and for such offline payments neither the ECB, the national central banks or payment services providers (PSPs) will have access to personal transaction data. That sound as if offline transactions will use different cryptography and architecture, which does not sound optimal, but OMFIF’s recent Future of Payments 2023 study reported that almost half of central banks expect to have a CBDC up and running in five years (and the proportion who do not expect to launch one in that timescale has falling from more than a third last year to a fifth this year) so they clearly think that such issue can be resolved soon.

Whether you think a CBDC is a good idea or not (and, to be clear, I do), there is no doubt that momentum is building. But momentum for what? Mairead McGuinnes, the European Commissioner for financial services, financial stability and Capital Markets Union, has said that there are three key reasons why Europe should have its own central bank digital currency (CBDC), the digital euro. These are that 

• A digital alternative to euro notes and coins could be used anywhere in the eurozone, providing access to a reliable and easily accessible form of payment, ensuring that the euro “continues to play a key role” in Europeans’ lives. The Commission says that nerchants across the euro area would be required to accept the digital euro, except very small merchants who choose not to accept digital payments (as the cost to set up new infrastructure to accept payments in digital euro would be disproportionate).
• A digital euro could support financial inclusion. People without bank accounts or other vulnerable groups rely heavily on cash, which can put them at risk as cash is used less. The digital euro would give everyone a digital option to pay — and it could even be used without a bank account. Personally, I see inclusion as a digital identity issue, rather than a digital money issue, so I remain sceptical as to whether a digital euro would make any difference. If people lack the documentation for a bank account, will they be allowed a digital wallet full of digital euros?
• A digital single currency could support innovation. Europe’s current payment systems are national or international — we don’t have truly European options, and are overly reliant on companies such as Visa, Mastercard, or PayPal.

Putting to one side the issue of sovereignty and whether a European alternative to the global card networks is needed or not, it is that last point about innovation that seems most important to me. A digital euro, or digital pound or digital dollar should not be a collection of point solutions to (eg) person-to-business e-commerce and (eg) person-to-person offline use case but a platform for next generation services.

What is the real difference between a digital or mobile wallet and a super app then? I suppose the boundary is a little fractal, but let’s return to the central issue of identity. Let’s draw the boundary by saying that a super app shares an identity across its ecosystem of services whereas in a wallet each of the credentials has its own identity. The former offers undoubted convenience for consumers and incentive for merchants to join the ecosystem, but also has implications for privacy.

My view is that is it better to use wallets that share not identity but authentication. I want a smart wallet not a super app. I rather like the idea of going to log in somewhere and when I am asked if I am over 18, or have a drivers licence, or am a British citizen then have the wallet on my phone pop up with a list of credentials that a) will satisfy the criteria and b) are acceptable to whoever is asking, so that I can choose one and go about my business. I expect the wallet to present the credentials in privacy-maximising order, so that for almost all such interactions my “John Doe” IS-OVER-18 credential will be the default to present the persistent pseudonym necessary to enable the overwhelming majority of transactions.

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To my surprise, the recent boom in artificial intelligence investments has done little to dig U.S. venture capital funding out of its hole.

VC funding decreased in the second quarter, which ends tomorrow, according to new data provided to The Information by Crunchbase. U.S. startups raised just $27.6 billion compared to $45.2 billion in the first quarter, representing a roughly 40% drop. Compared to the same period last year, it’s an even more substantial plunge of 55%.

In total, U.S. startups have raised $73 billion so far this year, indicating that 2023 fundraising won’t even come close to last year’s $215 billion raised, which itself saw a big drop from 2021, a record-setting year. There are reasons to be positive, though.

From Three Reasons to Look Past the 40% Drop in VC Funding — The Information.

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The bot security market size is projected to be worth US$ 666.7 million in 2023. The market is likely to surpass US$ 3,624.5 million by 2033 at a CAGR of 18.3% during the forecast period.

From Bot Security Market Size, Share & Forecast 2033 | FMI.

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Because the technology can produce such convincing and human-like content with ease, new cyber scams leveraging AI are harder for security teams to easily spot. AI-generated scams can come in the form of social engineering attacks such as multi-channel phishing attacks conducted over email and messaging apps. A real-world example could be an email or message containing a document that is sent to a corporate executive from a third party vendor via Outlook (Email) or Slack (Messaging App). The email or message directs them to click on it to view an invoice. With Generative AI, it can be almost impossible to distinguish between a fake and real email or message. Which is why it’s so dangerous.

One of the most alarming examples, however, is that with Generative AI, cybercriminals can produce attacks across multiple languages – regardless of whether the hacker actually speaks the language. The goal is to cast a wide net and cybercriminals won’t discriminate against victims based on language.

The advancement of Generative AI signals that the scale and efficiency of these attacks will continue to rise.

The Defense
Cyber defense for Generative AI has notoriously been the missing piece to the puzzle. Until now. By using machine to machine combat, or pinning AI against AI, we can defend against this new and growing threat.

From Generative AI in Cybersecurity: The Battlefield, The Threat, & Now The Defense – Unite.AI:

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Like all collaborative storytelling and participatory media, the ChatD&D experience reminded us that a good D&D adventure isn’t like being told a story by a novelist or storyteller. The narrative unfolds communally around a table, with plenty of backtracking, retconning, and joking—and avoiding the small-minded hobgoblins of consistency and rules-lawyering.

From ChatGPT’s Storytelling Chops Are No Match for Dungeons & Dragons | WIRED:

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As regulation comes for crypto, it will make transactions more expensive. Mr Poon of Hong Kong Polytechnic University says much of the cost of financial transactions comes from complying with regulations like know-your-customer and anti-money-laundering laws.

From The promise of crypto has not lived up to its initial excitement:

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Yet the argument that cbdcs will be needed to anchor the value of money is unconvincing.

From A flawed argument for central-bank digital currencies:

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Over the years plenty of people have argued that the monetary system could not function well without certain anchors, such as to gold or the dollar, only to be proved wrong. The idea that the system needs government-issued money to be in widespread use is likely to suffer the same fate. 

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“The article explores the history of equity markets, focusing on the role of technology in democratizing access and the subsequent rise of speculative behavior and manipulation. It highlights the impact of the 1929 crash and the introduction of securities regulations in the 1930s, which improved market conditions and investor protection. The article suggests that Bitcoin and the broader crypto market are in a similar phase of “democratization without regulation,” and argues that some level of government regulation could prevent manipulation and facilitate broader adoption.”

From Financial History: Crypto’s Bucket Shop Problem:

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