Snippings

xxx

About 3,000 businesses are registered on Companies House every day, and Barrow thinks 20 to 25 per cent are questionable. Almost 10 per cent are apparently registered by UK-resident Romanians, who make up 0.5 per cent of the population.

From Why kleptocrats and money launderers love Companies House – New Statesman:

xxx

 

xxx

 

Almost none of the information filed on Companies House is checked, and because it isn’t linked to HMRC’s data, Barrow says, “you can file completely different sets of accounts in both places, and no one will check”. A company can be set up in your name in minutes, without your knowledge — Barrow recently reported on a street in Anglesey where residents found that a series of zoos had been registered to their addresses — but it takes a court order to remove your name from the register.

 

From Why kleptocrats and money launderers love Companies House – New Statesman:

 

xxx

 

“The only way we beat this problem is transparency,”

xxx

About 3,000 businesses are registered on Companies House every day, and Barrow thinks 20 to 25 per cent are questionable. Almost 10 per cent are apparently registered by UK-resident Romanians, who make up 0.5 per cent of the population.

From Why kleptocrats and money launderers love Companies House – New Statesman:

xxx

Apple has stepped into Open Banking in the UK by acquiring Credit Kudos. This is one of the startups that uses transaction data and machine learning to create very accurate credit ratings. They use API access to bank accounts to collect real-time data and feed it into their systems to provide clients with affordability and risk assessment scores and are good example of how Open Banking data will support better lending, as risk assessment will be guided by richer data on under-served markets and business owners which will in turn open up opportunities in the significant total addressable market of finance-hungry SMEs and micro-entrepreneurs across the globe.

As it turns out, if you want to make a decision about whether to offer a short-term loan to an Uber driver who needs a new tyre or a small business that needs to finance expansion or a microenterprise that needs more stock for an upcoming craft market, traditional credit bureaus are not much help. If, on the other hand, you can get hold of the actual transaction data from the relevant bank account then you can make very accurate decisions.

With Apple expanding their range of services around payments, and presumably looking at partners for merchant onboarding and buy-now-pay-later and so on, the acquisition makes complete sense: it gives access to the data and algorithms for immediate opportunities but also provides a more general platform for exploiting Open Banking to obtain financial institutions data for future opportunities.

(Once again, I return to the convention of using Open Banking to mean the regulatory version and open banking to mean the generic connection of third-parties to customer data with consent)

BNPL is a good example of a service that can benefit from this approach and whether you think BNPL is sub-prime by another name (as I know many people do) or part of a natural repackaging of payments and credit in a connected world, there’s no doubt that it is important. While (as Visa pointed out in their last earnings call) the impressive growth of BNPL still leaves it as a small fraction of the total retail payments market, it is indicative of the ability of non-banks to mount a real challenge. Simon Taylor of 11FS says that BNPL “has to be the perfect use case for Open Banking” and explains that if a consumer could be persuade to take the option to “verify via your bank” or whatever then BNPL provider would have a better view of the consumer’s affordability.

(Mastercard is already deploying Open Banking technology through Finicity in the US and its pending acquisition of Aiia in Europe to use consumer permissioned data tied to debit or bank account credentials to run affordability checks on applicants.)

Why Now?

What is especially interesting to me about Apple’s move though is that it has taken so long. Many people (me included) thought that the introduction of Open Banking would lead to an inevitable asymmetric exploitation of bank service because Big Tech would gain access to bank data, whereas banks would have no reciprocal access to Big Tech’s data hoards. So I assumed that, for example, Facebook Pay would link the social media platform to customer accounts in order to allow instant transfers, but in fact they carried on using the debit card infrastructure.

One argument against the Open Banking route was that consumers would be reluctant to share their intimate financial details with technology companies, but this view was founded on the common misunderstanding that consumers know (or care) what open banking is and understand (or care about) the liability models. This is demonstrably wrong on both counts.

Fo example, half of all Americans have never head of “open banking” and only one in seven say that they would trust linking a third-party to their bank account, so it would seem that there is no reasonable prospect for open banking plays in the USA. Right? Wrong. As it happens four in five Americans have already linked their primary bank account to a fintech tool. As Jim Marous accurately observes, people don’t trust open banking or fintechs, but use both of them all the time.

Therefore, I deduce, the use of open banking to deliver more sophisticated services will continue to accelerate for the foreseeable future. And one interesting direction that they will develop is into payments. A recent UK survey found that half of all consumers, and two-thirds of all mobile banking users, would be willing to pay via open banking today if given the opportunity. Interestingly, around three in ten consumers said that a trusted brand would encourage them to use open banking as an alternative to cards. In contrast, more than one in six said a retailer could incentivise them to use open banking through loyalty schemes.

Accenture, for example, highlight the rise of Open Banking around the world as a factor enabling super-apps that use financial data from multiple sources to target customers’ needs and deliver customers financial services.

Apple’s move illustrate just how the exploitation of open banking is accelerating, but we are still only at the beginning of the consequent reorganisation of the financial services world. Sam Seaton, who runs Moneyhub, knows what she is talking about when it comes to this sort of thing and she has a nice way of framing strategy. She says that open banking gives a one-dimensional view of the consumer, open finance gives a two-dimensional view but to deliver real financial health you need the holistic three dimensional view of the customer that open data provides.

xxx

Ukrainian units have exploited Russia’s lack of communications to jam and interfere with tactical messages—in some cases even pinpointing the location of Russian general officers for snipers that have been trained by Western militaries over the past eight years.

From Ukraine Is Listening to (Almost) Everything Russian Troops Say:

xxx

xxx

The British Army has banned WhatsApp over fears Russia is hacking the platform to acquire operationally sensitive information.

All personnel, from senior officers to junior soldiers, must cease using the phone messaging service for professional purposes or face disciplinary action.

From British soldiers are ordered off WhatsApp due to hacking fears | Daily Mail Online:

xxx

xxx

Boris Johnson gets details of vital government business sent to him via WhatsApp, court papers have revealed.

From Boris Johnson gets summaries of sensitive government material via WhatsApp – BBC News:

xxx

xxx

L’initiative EPI, qui visait à ériger un concurrent européen face à Visa et Mastercard, abandonne le projet de création d’un scheme carte. Un renoncement qui s’explique par le retrait de plus de la moitié des participants. Le projet se recentre sur son deuxième volet : le wallet et le paiement numérique. Les treize membres restants trancheront dans deux mois sur l’avenir de la société.

From EPI abandonne la création d’un scheme carte – mind Fintech:

xxx

xxx

There are many compelling reasons to have a digital dollar. At the top of the list are much faster transaction times, easier access to money for many, and less risk of fraud. If executed smoothly, it would help ensure the U.S. dollar remains the world’s most favored currency. As the Fed wrote in January, adding an official U.S. government digital currency is “a means to expand safe payment options, not to reduce or replace them.”
But there are also serious concerns and practicalities that must be worked out. How will people access the digital dollar? Will there be government-run “digital wallets,” or will those digital wallets occur only in the private sector? The Fed has indicated it does not particularly want to become a consumer bank. Similarly, would a digital dollar use blockchain technology, like bitcoin and other e-currencies? That would help prevent fraud, but it would be a huge expansion of blockchain usage. Finally, how will the government use all of the new data it collects from digital dollar users, and what privacy protections will be in place? China offers a cautionary tale, as its government can track all transactions and seize digital yuan assets. Launching a digital currency will also be expensive, especially because of the need to ensure the system is not hacked.

From Opinion | The U.S. should not rush into a digital dollar – The Washington Post.

xxx

President Biden’s recent executive order on digital assets was, as the Financial Times reported, short on policy detail. There was a commitment to “reinforce US leadership in the global financial system” through means including “the responsible development of payment innovations and digital assets”.

xxx

Crypto billionaire Sam Bankman-Fried
“I don’t think it moves the needle that much from where we were before. I think it’s more just a reflection of where the administration is than anything else,” the CEO of crypto exchange FTX told CNBC.

From Biden’s Crypto Order: Sam Bankman-Fried, Kevin O’Leary, Novogratz React.

xxx

 

But there was also emphasis on studying how some form of central bank digital currency (CBDC) could work in practice, which once again has raised the question of what the point of digital dollar might be.

 

Christopher Waller, a member of the Board of Governors of the Federal Reserve System, said earlier this year he was sceptical that a Federal Reserve CBDC “would solve any major problem confronting the U.S. payment system”. I actually agree with the general sentiment here, but I would phrase it in a slightly different way: that there is no “burning platform” for a retail central bank digital currency in the United States. Appropriately-regulated private sector “stablecoins” could be used to satisfy the demands of the decentralised finance (“defi”) sector for money that can be algorithmically-traded for cryptographic assets.

Having said that, it is not obvious that the long-term goals of such stablecoins would be congruent with wider public policy goals around money and payments. President Biden’s order included a mention of the potential for a US digital dollar “to foster greater access to the financial system” but when it comes to financial inclusion, I have to say that it is not at all clear to me how a CBDC could deliver greater access unless there is greater access to the digital wallets in which such currency might be stored. If these wallets can only be provided by banks, and the same customer due diligence (CDD) rules will apply as for bank accounts, then

 

The Brookings Institute has just published an alternative proposal calling for an account-based alternative (that would undoubtedly be lower cost). They say that “while the need to address financial inclusion is great, some question whether a Fed-administered CBDC is the best way to reach retail markets”. That “some” would definitely include me.

We propose that the U.S. Treasury Department create “Treasury Accounts” as a means of improving access to financial services for many Americans. These would be digital accounts that would facilitate distribution of federal benefits and provide low cost, no-frills payment services. Treasury could create these accounts under existing statutory authority. In addition, Treasury’s substantial experience, dating back several decades, in devising benefit distribution and payment service programs for individuals can serve as the foundation for our proposal. Treasury Accounts could make it easier for those who are underserved by today’s banking system to both open and sustain an account. We propose a limit on account size and rollovers to private accounts to minimize disintermediation of bank deposits. As the public debate heats up over whether to create a U.S. central bank digital currency (CBDC), we explain why Treasury is better suited, at least in the short term, to provide retail accounts than the Federal Reserve, and why this proposal would be a faster, easier way to achieve some of the primary objectives of a CBDC.

 

If this is the case, then

 

xxx

There are many compelling reasons to have a digital dollar. At the top of the list are much faster transaction times, easier access to money for many, and less risk of fraud. If executed smoothly, it would help ensure the U.S. dollar remains the world’s most favored currency. As the Fed wrote in January, adding an official U.S. government digital currency is “a means to expand safe payment options, not to reduce or replace them.”
But there are also serious concerns and practicalities that must be worked out. How will people access the digital dollar? Will there be government-run “digital wallets,” or will those digital wallets occur only in the private sector? The Fed has indicated it does not particularly want to become a consumer bank. Similarly, would a digital dollar use blockchain technology, like bitcoin and other e-currencies? That would help prevent fraud, but it would be a huge expansion of blockchain usage. Finally, how will the government use all of the new data it collects from digital dollar users, and what privacy protections will be in place? China offers a cautionary tale, as its government can track all transactions and seize digital yuan assets. Launching a digital currency will also be expensive, especially because of the need to ensure the system is not hacked.

From Opinion | The U.S. should not rush into a digital dollar – The Washington Post.

xxx

But How?

The key barrier

 

Another potential advantage of Treasury Accounts could be in simplifying know-your-customer (KYC) screening, which often prevents or discourages unbanked persons from obtaining private accounts. Moreover, once someone is on a “do not bank” list of account screening consumer reporting services such as ChexSystems, it can be very difficult to get an account from any bank. The account opening screening for a Treasury Account could be considered largely or entirely satisfied by the eligibility criteria—that is, the fact that someone has already established eligibility for and is receiving government benefits means a further KYC process is not necessary. If so, the same standard could apply to the transfer to a private firm account if the Treasury Account maximum were reached.

 

 

xxx

The Federal Reserve Bank of Boston (Boston Fed) and the Massachusetts Institute of Technology’s Digital Currency Initiative (MIT DCI) are collaborating on exploratory research known as Project Hamilton,

From Project Hamilton Phase 1 Executive Summary – Federal Reserve Bank of Boston.

xxx

Despite using ideas from blockchain technology, we found that a distributed ledger operating under the jurisdiction of different actors was not needed to achieve our goals. Specifically, a distributed ledger does not match the trust assumptions in Project Hamilton’s approach, which assumes that the platform would be administered by a central actor. We found that even when run under the control of a single actor, a distributed ledger architecture has downsides. For example, it creates performance bottlenecks, and requires the central transaction processor to maintain transaction history, which one of our designs does not, resulting in significantly improved transaction throughput scalability properties.

Well, I imagine that the core of their discovery was that a blockchain is a very specific solution to the problem of forming consensus in the presence of untrusted third parties but in a Federal Reserve digital currency of any kind there would be no such parties.

 

 

 

CBDC design choices are more granular than commonly assumed. Currently, CBDC designs are categorized as direct, two-tier, or hybrid models, with “token” or “account” access models 1 2 7 12 15. We found these limited categorizations lacking and insufficient to surface the complexity of choices in access, intermediation, institutional roles, and data retention in CBDC design 10. For example, wallets can support both an account-balance view and a coin-specific view for the user regardless of how funds are stored in the database.

Going Offline

I have written before (eg, here in Forbes) that one of the great attractions of building a new digital cash infrastructure to implement a digital currency, instead of just laying a simple peer-to-peer protocol on top of the existing digital money infrastructure, is that it would add to diversity to the infrastructure and therefore resilience to the payment system, which is vital national infrastructure.

 

xxx

 

DCash — the digital currency used by seven Caribbean nations — has been down for the last two weeks and it’s unclear when it will be back online, the Eastern Caribbean Central Bank said Friday.

 

From Caribbean Digital Currency, DCash, Remains Offline for Second Week.

 

xxx

It’s not just that CBDC must work offline, but that it must work independently from he existing electronic money infrastructure.

 

xxx

Many Kazakh citizens rely on traditional digital payment methods like debit cards to buy food, but without internet connections, these were rendered useless. Local media have reported long queues for ATMs and withdrawal caps because of shortages of cash.

For central banks, the situation in Kazakhstan shows both the importance and the limitations of cash. The crisis makes it clear that it will not be enough for central banks to develop an online digital currency transaction network while treating cash as the offline back-up.

From Kazakhstan unrest highlights importance of offline payment functionality – OMFIF.

xxx

 

This one of the aspects of digital currency that fascinates me. Some innovative thinking will required to deliver a genuine cash alternative into mass markets and my strong suspicion is that it will depend on the use of secure, tamper-resistant hardware. Writing [here a year ago], Vipin Bharathan talked about Visa’s proposed Offline Payment System (OPS) which implement digital currency using digital signatures generated in this hardware, in the form of Trusted Executions Environments (TEEs) in mobile phones and laptops and so on. This is only one of the solutions being proposed but it illustrates the general class of most-likely implementation rather well: since these chips cannot be cloned, they provide a means to prevent the subversion of transactions even when they are device-to-device with no blockchain or database in sight.

These TEEs are chips (just the like chips on bank cards or the SIM cards inside mobile phones) that cost next to nothing.

China 

xxx

I tattooed my favorite crypto logo on my arm – but I want it removed after coin turned out to be a ‘Ponzi scheme’

From I tattooed my favorite crypto logo on my arm – but I want it removed after coin turned out to be a ‘Ponzi scheme’.

xxx

I did this too

xxx

However, recalling the trouble he experienced last year, Chen noted that “while it is a lot more convenient, the problem is also more serious if you lose your phone”.
He said he spent about a whole day “re-registering” his WeChat and deactivating the old phone, which was linked to his virtual ID.

From China plans digital version of national identification card later this year, premier says | South China Morning Post.

xxx