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“I hope Musk cleans up Twitter,” the JPMorgan
CEO told CNBC’s Julianna Tatelbaum, adding he thinks Musk should look into eliminating anonymous accounts from the site.

From Jamie Dimon says Musk should ‘clean up Twitter,’ echoes bot concerns:

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The European Central Bank (ECB) will collaborate with five companies to develop potential user interfaces for the digital euro.

The aim of this prototyping exercise is to test how well the technology behind a digital euro integrates with prototypes developed by companies. Simulated transactions will be initiated using the front-end prototypes developed by the five companies and processed through the Eurosystem’s interface and back-end infrastructure. There are no plans to re-use the prototypes in the subsequent phases of the digital euro project.

Together with the ECB team, the selected companies will each focus on one specific use case of a digital euro:

peer-to-peer online payments – CaixaBank;
peer-to-peer offline payments – Worldline;
point of sale payments initiated by the payer – EPI;
point of sale payments initiated by the payee – Nexi;
e-commerce payments – Amazon.

From ECB selects external companies for joint prototyping of user interfaces for a digital euro:

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For example, between June and November 2021, the number of physical skimming devices on ATMs and point-of-sale (POS) terminals soared 176% compared to the previous 12-month period, Visa reported Thursday (Oct. 6) in a press release sent to PYMNTS.

At the same time, the online fraud that accelerated so quickly during the pandemic remains the biggest threat, with Visa’s Global Risk team finding that nearly three-quarters of fraud and data breach cases involve eCommerce merchants, according to the release.

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As Simon Taylor pointed out recently, right now consumer fintechs are trading at around 2.2x revenue (for comparison, PayPal is at about 4.5x revenue) and financial marketplaces at 1.1x revenue. Meanwhile, financial data players are at 8.7x against McKinsey’s estimate of the not even 1x of traditional banks because the market clearly sees data as central to the future of the sector.

Why this multiple? Well, the use and reuse of data is central not only to the future of fintech but economic growth as a whole, given that the data economy (however defined) is a decent chunk of the overall economy.

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And, more recently, the CFPB took measures to increase federal oversight of the fintech industry, with the announcement of a new use for old authority, known as 1024, to supervise non-bank companies that it believes pose risks to consumers.

By invoking 1024 authority, the CFPB is looking to “level the [regulatory] playing field” between banks and certain fintech companies not currently subject to federal oversight. Importantly, the CFPB views “uncontrolled flows of consumer data” as risky and may recommend, through examination, that covered entities establish secure data-sharing methods (i.e., APIs) with third parties, including depositories.

From From trusted stewards of money to data | Bank Automation News:

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We don’t want data to be locked down and hoarded, we want it to flow. But this introduces a conflict that must be resolved: we want data to flow, but we want privacy and security to be maintained. But how? How can a bank persuade me to share more of my data, while simultaneously keep my personal information secure?

The consultants McKinsey have just published a “Technology Trends Outlook for 2022” which identifies trust architectures and digital trust as one of their key area of focus. I rather like their use of the phrase “privacy engineering” to encompass the techniques used to enable oversight, implementation, operation, and maintenance of privacy in order to deal with reduce risks to data privacy, improve resource allocation and embed privacy enablement into existing systems. As long time advocate of the use of priavacy-enhancing technologies (PETs) in the infrastructure for the digital economy, I am very happy to see mainstream management consulting take up the cudgel for change in this area.

I am actually very optimistic about what is going on this area because the new technologies that we now have at our disposal, the technologies of what I’ve labelled “counterintuitive cryptography”, give us the ability to deliver the apparently contradictory goals of privacy and sharing. To illustrate this point using the simplest of examples, it is trivial in the world of cryptography to deliver to a bar an unforgeable proof that I am over 18 without disclosing my age or my date of birth.

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The letter reflects frustration among some fintechs who argue that if consumers were able to share their full financial data with them, they could better offer money-saving services including personalised spending insights, ways to manage credit card debt and cheaper payment methods.

From Fintechs say UK credit cards restrict access to consumers’ own data | Financial Times:

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Campaign group Axe the Card Tax, which includes trade bodies such as the British Retail Consortium, the Federation of Small Businesses and the Retail Charity Association, estimated that in total, scheme fees — which go to the card networks — and processing fees could cost businesses in the UK £1.9bn annually.

From Fintechs say UK credit cards restrict access to consumers’ own data | Financial Times:

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A blockchain linked to Binance, the world’s largest crypto exchange, has been hit by a $570 million hack, a Binance spokesperson said on Friday, the latest in a series of hacks to hit the crypto sector this year.

Binance CEO Changpeng Zhao said in a tweet that tokens were stolen from a blockchain “bridge” used in the BNB Chain, known until February as Binance Smart Chain.

From Binance-linked blockchain hit by $570 million crypto hack | Reuters:

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The Bank of Canada recently published a note (Staff Analytical Note 2022-14) on what they call the archetypes for a retail CBDC in which they point out that a direct model — in which transacting parties directly provide their own oversight and communicate between themselves to exchange and record settlement information — is the only model that deliver cash-like person-to-person transactions, where counterparties can settle a transaction without involving a third party.

The direct model that they refer is the maximally distributed model: Each participant (well, each participant’s device) can store digital assets and exchange them with other devices. offline. The Bank of Canada definition of offline refers to the ability of counterparties to transact when connected only to each other and no other party. This means that they can connect over a local interface (eg, Bluetooth) and execute transactions in the absence of mobile connectivity, the internet or even electricity. The Bank of Canada suggest two forms of offline capability: extended offline (i.e., offline clearing and settlement) and intermittent offline (offline clearing only). In an intermittent offline system, transactions clear instantly, but funds do not settle until the payee resumes connectivity with a remote service. In extended offline, the funds transfer completes so that the payee can spend the funds received right away without connectivity to a network service.

There are three main reasons why this “direct” model makes the most sense: inclusion, scale and resilience. 

The reach of a cash alternative must be universal. Every nook and cranny. Citizens

The scale of a cash alternative must greatly exceed the scale of either cash or any current electronic alternatives. Why? Well because in addition to having every citizen using the system at the same time, it is highly likely that machines and bots will be executing vast numbers of transactions at the same time.

The resilience of a cash alternative is greatly enhanced by offline device-to-device transfer. There is no central system to take down, no switches to knock out, no network to paralyse. Look at what has happened to the Shetland Islands, north of Scotland. There were two undersea cables connecting the islands to the world. Both are out of action, having either been dredged up by fishermen, bitten through by sharks or blown up by specially-trained dolphins acting on behalf of a foreign power. Now, no-one can buy anything in the shops.

 

Hardened

This lack of third-party oversight has obvious security implications, though. The Bank of Canada say (and I agree) that such a model would need secure, tamper-resistant hardware to maintain and update the state of the decentralised ledger. As they go on to note, such solutions have been deployed at a relatively small scale and they then says that it is “unknown whether their security can be hardened sufficiently to support a general-use fiat currency system” at the scale of a national population. The clear danger is that should such hardware be compromised then a device could to issue CBDC fraudulently at scale.

Now, I have to say I am more optimistic about the ability of technology to deliver here. Too explain why, let me begin by picking up something that John Kiff pointed out on the International Monetary Fund blog recently. John observed that as most of the world’s central banks rush to develop digital currencies, almost all the research and trials focus on internet-based technology, whether it be Hyperledger Fabric in Nigeria or R3’s Corda in Sweden. He then goes on to ask the obvious question: What will happen when the web goes down in a war? What if there is a natural disaster? And what about the three-quarters of the world’s adult low-income population that doesn’t even have internet access?

He concludes, as the Bank of Canada did, that for a digital currency to be useful, it must work offline. And here, John says, the future of offline CBDCs may lie in the technological past. That’s where his nod to a distant past and a push to develop offline digital payment systems (eg, Mondex) comes in. Some of the very valuable work done in this space goes back a generation, to that long ago time before smartphones, but it remains valid and it is important that the lessons learned then are not forgotten.

Mondex, for one, did think that the tamper-resistant hardware, when combined with intelligent audit, was adequate to support population-scale electronic cash. And when their provably-secure design is transplanted to today’s hardware (particularly secure elements), I think it can indeed deliver.

In other words, a retail CBDC that is going to function as a viable cash alternative must function offline and the technology to deliver this at population scale already exists. Let’s do it.

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Instant-payments volumes are increasing 40 to 60 percent globally and showing signs of reaching an inflection point on the S-curve.

From Next moves in the global payments ecosystem | McKinsey.

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A2A transaction revenues continued to increase their contribution in most geographies, in total accounting for roughly 29 percent of 2021’s rise in global revenue. The expansion of applications built on instant-payment use cases—such as bill payment, point of sale (POS), and e-commerce—fueled the volume increase.

From Next moves in the global payments ecosystem | McKinsey.

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