Philosopher Yuval Noah Harari warns of AIs risks in finance
The bestselling author, philosopher and historian sees grim potential for AI to get out of control in the financial system.
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The bestselling author, philosopher and historian sees grim potential for AI to get out of control in the financial system.
The central bank in the United Arab Emirates said it has started implementing its digital currency strategy with partners G42 Cloud and R3. According to the central bank, the digital currency initiative is expected to “further position and solidify the UAE as a leading global financial hub.” CBDC Strategy to Focus on Three Pillars The [...]
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<p>The Bank for International Settlement (BIS) and its partners, the central banks of Israel, Norway and Sweden have completed a joint experiment on cross-border retail central bank digital currency (CBDC). The experiment was tagged ‘Project Icebreaker.’ Retail CBDCs are government-backed digital currencies used for payment purposes by consumers and businesses.</p><p>The experiment, which studied the potential advantages and challenges of using retail CBDCs in international payment, found that <a href="https://www.financemagnates.com/forex/" target="_blank" rel="follow">foreign exchange (FX) providers</a> can be used to facilitate cross-border <a href="https://www.financemagnates.com/tag/cbdc/" target="_blank" rel="follow">retail CBDCs</a> by breaking down a cross-border transaction into two domestic payments. </p><p>‘The Hub-and-Spoke Model’</p><p>In a statement released on Thursday, BIS explained that it has developed a “hub-and-spoke solution” through which cross-border retail CBDCs never have to exit their systems. This system works by requiring many forex providers to submit quotes to a retail CBDC system’s hub which then selects the cheapest alternatives for end users to settle their transactions.</p><p>This model differs from most of the existing cross-border payment systems under which users or payers have no choice about the exchange rate or who provides the forex conversion, the international financial institution noted. BIS added that its new solution uses bridge currencies to fight the problems of insufficient liquidity for currency pairs, thereby preventing the attendant issues of higher fees and delay in cross-border payments. </p><p>“The project also demonstrated that the hub-and-spoke model can reduce <a href="https://www.financemagnates.com/terms/s/settlement/" class="terms__main-term" id="2dc6d2c7-1626-4ecf-811e-4c1aabbdb280" target="_blank">settlement</a> and counterparty risk by using coordinated <a href="https://www.financemagnates.com/terms/p/payments/" class="terms__secondary-term" id="f1d2a713-da14-4a6b-8fcd-e8f360d07f45" target="_blank">payments</a> in central bank money; and complete cross-border transactions within seconds,” BIS explained.</p><p>Furthermore, BIS said the new model means that countries considering the development of their domestic CBDCs can introduce these features and other innovative services into their cross-border transactions. It added that the project provides a “deeper understanding of the technologies that can be used and the technical and policy choices available.”</p><p>“Project Icebreaker is unique in its proposition. It first allows central banks to have almost full autonomy in designing a domestic retail CBDC. Then it provides a model for that same CBDC to be used for international payments,” explained Cecilia Skingsley, the Head of the BIS Innovation Hub.</p><p>US, Australia Make New Moves on CBDC</p><p>Meanwhile, the United States and Australia both recently provided <a href="https://www.financemagnates.com/cryptocurrency/us-australia-make-new-moves-on-cbdc/" target="_blank" rel="follow">new updates on their efforts</a> towards assessing the feasibility of a CBDC. While the United States says it is planning to establish a new Treasury Department-led working group to deliberate on the possible launch of a digital dollar, the Reserve Bank of Australia unveiled 14 firms that proposed various CBDC uses cases to be tested in its limited-scale CBDC pilot that “will take place over the coming months.”</p> This article was written by Solomon Oladipupo at www.financemagnates.com.
G20 countries have announced that the Financial Stability Board, the International Monetary Fund, and the Bank for International Settlements will release recommendations on global crypto regulation by July. (Read More)
<p class="MsoNormal">The Group of Central Bank Governors and Head of Supervision (GHOS) of the Bank for International Settlements (BIS) has endorsed a global prudential standard for banks’ exposure to crypto assets. The Group has also decided on January 1, 2025, as the implementation date for the standard.</p><p class="MsoNormal">The standard was developed by the Basel Committee on Banking Supervision, the BIS’ primary global standard setter for the prudential regulation of banks, the BIS said in <a href="https://www.bis.org/press/p221216.htm" target="_blank" rel="nofollow">a statement</a> released on Friday.</p><p class="MsoNormal">“Unbacked cryptoassets and <a href="https://www.financemagnates.com/tag/stablecoin/" target="_blank" rel="follow">stablecoins</a> with ineffective stabilization mechanisms will be subject to conservative prudential treatment. The standard will provide a robust and prudent global regulatory framework for internationally active banks' exposures to cryptoassets that promotes responsible innovation while preserving financial stability,'' <a href="https://www.financemagnates.com/tag/bis/" target="_blank" rel="follow">BIS</a> explained in the statement.</p><p class="MsoNormal text-align-justify">Low Banking System Exposure to Crypto</p><p class="MsoNormal">According to the BIS, the direct exposure of <a href="n" target="_blank" rel="nofollow">the global banking system</a> to crypto assets “remains relatively low.” However, the international financial institution noted believes that recent events have necessitated having “a strong global minimum prudential framework for internationally active banks to mitigate risks from cryptoassets.”</p><p class="MsoNormal">BIS noted that the GHOS has, therefore, tasked the Basel Committee with continuously assessing bank-related developments in cryptoasset markets, including the role of banks as stablecoin issuers, custodians of cryptoassets and as broader potential channels of interconnections.</p><p class="MsoNormal">“Today's endorsement by the GHOS marks an important milestone in developing a global regulatory baseline for mitigating risks to banks from cryptoassets. It is important to continue to monitor bank-related developments in cryptoasset markets. We remain ready to act further if necessary,” Tiff Macklem, Chair of the GHOS and Governor of the Bank of Canada, noted.</p><p class="MsoNormal text-align-justify">The New Standard</p><p class="MsoNormal">According to the BIS, <a href="https://www.bis.org/bcbs/publ/d545.htm">the standard</a> will be incorporated as a new chapter of the consolidated Basel Framework (SCO60: Cryptoasset exposures). The standard accommodates feedback from BIS' second consultation on the prudential treatment of banks’ exposures to cryptoassets carried out by the Basel Committee in June 2022.</p><p class="MsoNormal">Under the new standard, banks will be required to classify cryptoassets into Group 1 and Group 2, with Group 1 cryptoassets including digital assets such as tokenized traditional assets and stablecoins. On the other hand, Group 2 cryptoassets “pose additional and higher risks” compared to those in Group 1 and include assets such as unbacked cryptoassets.</p><p class="MsoNormal">“A bank’s total exposure to Group 2 cryptoassets must not exceed 2% of the bank’s Tier 1 capital and should generally be lower than 1%,” the standard says.</p><p class="MsoNormal">Furthermore, the standard prescribes a redemption risk test and supervision and regulation requirements for cryptoassets.</p><p class="MsoNormal">“This test and requirement must be met for stablecoins to be eligible for inclusion in Group 1. They seek to ensure that only stablecoins issued by supervised and regulated entities that have robust redemption rights and governance are eligible for inclusion,” the standard notes.</p> This article was written by Solomon Oladipupo at www.financemagnates.com.
Central Banks are about to gaslight degens. Covered: Central Banks v. DeFi Who Wins? What A Centralized Rug Pull Could Look like Central Banks v. DeFi Central Banks are clearly gearing up for an assault on their burgeoning rival, Decentralized Finance. We’re not just talking about one central bank, or two, or three even. We […]
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The central banks of Australia, Singapore, Malaysia, and the Republic of South Africa have set out to test the use of state-issued digital currencies in cross-border payments. The trial, led by the Bank for International Settlements, aims to establish whether they can simplify transactions and make them cheaper. Reserve Bank of Australia Teams Up With… More
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The Bank for International Settlements (BIS) has joined forces with the central banks of South Africa, Malaysia, Singapore, and Australia to kick start a project dubbed Dunbar aimed at testing the use CBDCs in cross border payments. (Read More)
Intergovernmental forum, Group of Twenty (G20) welcomes the call made by the Financial Stability Board (FSB) for tougher rules to guide the global cryptocurrency industry, Nirmala Sitharaman, Finance Minister of India, said during a press conference held today (Tuesday) in India. India currently holds the G20 presidency,
Where Will G20 Stand on Crypto?
On Monday, FSB, whose member comprises the United States, the European Union, China and the UK, issued a regulatory framework to guide crypto-asset activities in the wake of the collapse of crypto exchange FTX and digital asset lender Celsius in 2022. The framework includes enhancements targeted at ensuring adequate protection of client assets, addressing the risks associated with conflicts of interest, and strengthening cross-border cooperations.
The recommendations focus on mitigating financial stability risks and do not exhaustively cover all specific risk categories related to crypto-asset activities, Finance Magnatesreported. Central bank digital currencies, viewed as digitalized central bank liabilities, are also not subject to these recommendations.
However, speaking on the recommendations, Sitharaman noted that the G20 during its third Finance Ministers and Central Bank Governors Meeting held on Tuesday in Gujarat, India, deliberated on the regulatory challenges posed by the crypto asset ecosystem.
“Members welcomed the high-level recommendations of the FSB on crypto asset activities and also the global stablecoin arrangement,” Sitharaman said during the press briefing held after the meeting.
The Indian Finance Minister pointed out that members of the forum discussed the country’s G20 presidency note on cryptocurrency, without specifying what was discussed.
“Members also discussed the presidency note that India has prepared and noted that it will be an important input toward prioritising areas of work essential for achieving a comprehensive, cohesive, and coordinated global policy and regulatory frameworks,” Sitharaman added.
Different Worldview
The G20’s positive gesture to the recommendations made by the FSB comes as the Bank for International Settlements (BIS) earlier urged the group to dismiss digital assets, noting that they have ‘inherent structural flaws’. The BIS, which is a group comprising the world's major central banks, added that there is a lack of accountability in the cryptocurrency ecosystem.
Meanwhile, recent developments across the crypto industry show that major stakeholders across the global financial market see digital asset regulation in a different light. While the European Union recently passed the Markets in Crypto-Asset (MiCA) regulation, becoming the first major jurisdiction to introduce a comprehensive law to regulate the crypto industry, the US federal securities regulator in recent months stepped up its campaign against ‘unregistered’ crypto exchanges, seeking their compliance with decades-old securities law through the court.
On the other hand, the UK recently sanctioned a new law that empowers public authorities to regulate digital assets and supervise crypto promotions. The new regulation is part of the country’s plan to turn the country into a crypto hub.
Similarly, in Asia, Hong Kong recently rolled out new rules for its crypto industry and has already captured the attention of 80 local and foreign digital assets firms. Singapore, another country in the region, has also stated interest in becoming a global crypto hub.
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This article was written by Solomon Oladipupo at www.financemagnates.com.
According to a BIS report, Jamaica, Nigeria, China, Sweden, the Bahamas and Peru have CBDC programs in various stages of development.
The Bank for International Settlements (BIS), an organization that seeks to support the international cooperation of the world’s central banks, has released the results of its 2022 survey on central bank digital currencies (CBDC) and crypto. The survey found that 93% of the 86 banks surveyed were involved in CBDC-related work at different levels. BIS:
The post BIS Survey: 93% of the World’s Central Banks Are Engaged in CBDC Work appeared first on BTC Ethereum Crypto Currency Blog.
The Bank for International Settlements (BIS) has told the Group of Twenty (G20), the intergovernmental forum comprising the world's top 19 economies, and the European Union, that cryptocurrencies cannot be adopted as a monetary instrument because they have "inherent structural flaws."
In a report submitted to the G20 Finance Ministers and the Central Bank Governors, the BIS stated in detail the flaws facing digital assets, among them instability and inefficiency. The BIS, which brings together the world's major central banks, added that there is a lack of accountability in the cryptocurrency ecosystem.
Shortcomings in Crypto
"Crypto has so far failed to harness innovation to the benefit of society," the BIS stated. "Crypto does not finance any real economic activity. Additionally, it suffers inherent shortcomings related to stability and efficiency, as well as accountability and integrity."
Conversely, in the report, the BIS acknowledged that cryptocurrencies had an element of genuine innovation like programmability, which enables the automation of transactions and integration into other systems. According to international financial institution, such aspects, when combined with asset tokenization, can reduce transaction costs.
However, the BIS is faulting cryptocurrency projects for exacerbating the flaws in traditional financial systems. The BIS particularly cited Decentralized Finance (DeFi), a financial system that uses blockchain technology to offer services such as lending, investing, and trading of financial instruments.
BIS’ Concerns about Stablecoins
The BIS cited the collapse of the cryptocurrency exchange FTX as an example of the vulnerability of the digital asset space. Besides that, the institution pointed out some of the challenges facing the stablecoin sector in light of last year's collapse of the Terra USD project.
"Stablecoins are subject to a conflict of interest whereby the issuers are incentivized to invest in risky assets," the BIS explained. "The stability of stablecoins, therefore, depends on the quality and the transparency of their asset reserves, which often lacks."
The skepticism the central bankers expressed concerning digital assets is nothing new in light of their push for central bank digital currencies (CBDCs), the digital alternatives to fiat currency. CBDCs are expected to transform how users interact with financial systems.
Finance Magnates reported in June that the International Monetary Fund (IMF) was working on a global infrastructure for the CBDCs. The project aims to ensure interconnectedness in payment settlements, IMF's Managing Director, Kristalina Georgieva, said.
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This article was written by Jared Kirui at www.financemagnates.com.World Crypto Global opens the door to digital freedom for everyone.
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