BFC FinTech Monitor (December 2022)

Tags Artificial Intelligence Cryptocurrency Cybersecurity Digital Banking Events Payments Regulation

Stay up-to-date on all the latest FinTech news and information from around the world in the BFC FinTech Monitor.

Around the World

#Reports and Studies

• A new study by the European Central Bank (ECB) has found that cash remains the most commonly used payment instrument at points of sale across the euro area. At the same time, the use of cash has declined from 72% of all transactions in 2019 to just 59% in 2022.
• A Fintech Open Source Foundation (FINOS) survey has found that open source solutions in the financial services sector are gaining momentum, with 56% of financial institutions benefitting more from them than in the past.
• According to a report by Ondato, European banks spend most of their budgets on manual anti-money laundering (AML) and KYC processes and procedures. The reason for this is that such processes cannot be scaled to cover the costs and risks associated with growing compliance requirements.
• Finastra conducted a survey of 750 financial services professionals from seven countries regarding their attitudes towards open finance, finding that 48% considered this area as “mandatory” for implementation. This is up from 38% one year ago.
• A World Bank and Cambridge Center for Alternative Finance (CCAF) study has found that financial regulators are prioritizing fintech business models to promote financial inclusion and stimulate local economies. This is especially true in emerging market and developing countries.
• A Capgemini survey revealed that more than 75% of consumers expect the Metaverse to impact how they interact with businesses and individuals. Additionally, 7 in 10 companies believe that metaverses and immersive experiences will eventually become the hallmark of the market in terms of customer experience.
• According to Polaris Market Research, the anti-money laundering (AML) market will reach USD 7.7 billion by 2030. For comparison, the same market was estimated at USD 2.1 billion in 2021.

#Innovations

• Nobid, a consortium of several European countries (Denmark, Germany, Iceland, Italy, Latvia and Norway), has been selected to implement a cross-border payments pilot project for a digital identity software wallet initiated by the European Commission (EC).

#Cryptocurrencies, Blockchain and Non-Fungible Tokens (NFTs)

• Jared Gross, head of institutional portfolio strategy at JPMorgan Asset Management, has stated that cryptocurrency, as an asset class, is virtually non-existent for most large institutional investors.
• Defiant has reported that stablecoin payments reached USD 7.4 trillion in 2022, more than three times Mastercard. Only Visa has a more impressive figure of USD 12 trillion.
• Visa plans to launch automatic bill payments (including utility bills) using cryptocurrency. It is expected that such transactions will operate based on Ethereum technology.
• ConsenSys will add the ability to buy cryptocurrency through the PayPal app to the MetaMask non-custodial wallet.
• Brazilian President Jair Bolsonaro approved a bill to regulate cryptocurrencies. The bill provides for: (1) criminal liability for fraud with virtual assets (from 4–6 years imprisonment and fines), (2) licensing requirements for “virtual service providers” for those who deal in digital assets and (3) control measures for these assets by the Brazilian Securities and Exchange Commission (CVM).
• The Financial Stability Board (FSB) will develop a roadmap for regulating cryptocurrencies in 2023.
• Microsoft has introduced restrictions on cryptocurrency mining to improve the stability of its cloud services.
• The world’s largest cryptocurrency exchange, Binance, will allocate USD 1 billion for a 6-month industry recovery initiative to invest in companies from the digital asset sector.
• American multinational financial conglomerate JPMorgan has registered a trademark for a cryptocurrency wallet.
• The International Monetary Fund (IMF) has proposed strengthening regulations and improving consumer protection in the African cryptocurrency market. This is due to the collapse of one of the largest crypto exchanges and the subsequent fall in prices for crypto assets. The same event prompted the Financial Stability Board (FSB) to call for a global framework to regulate and oversee cryptocurrencies.
• The US Department of Energy Research Lab is using blockchain to make the power grid more resilient to cyberattacks.

#Central Bank Digital Currencies (CBDCs)

• The European Central Bank (ECB) has presented documentation related to the Digital Euro Prototype Workshop, which will help market participants develop interface prototypes that can be integrated with server infrastructure. A report on the implementation of the project as a whole is also available and states that the overall design of the European CBDC will be ready in the second half of 2023.
• According to a report by the Bank for International Settlements (BIS), nearly all African regulators are interested in or are developing their own CBDCs.
• The Bank of Brazil plans to issue a digital real in 2024, following the completion of a pilot program with financial institutions.
• Regulators in France and Luxembourg have successfully completed an experiment using CBDC to settle EUR 100 million in digital bonds. Goldman Sachs, Santander and Société Générale were involved in a banking syndicate role for the issuance and subsequent operation of the digital bonds.
• The Central Bank of Canada plans to hold a public consultation on a national CBDC.
• HSBC, the Central Bank of France and IBM have successfully tested wholesale CBDC interoperability, using three scenarios: (1) the issuance and distribution of CBDC-denominated debt instruments, (2) the initiation of subscriptions for bonds in the primary market and the settlement of transactions in the secondary market with subsequent coupon payments and (3) the execution of cross-border, cross-currency, cross-technology and cross-network payments.
• The Japanese regulator will conduct a pilot launch of the digital yen in the spring of 2023. This includes working with major private banks and other organizations to identify and resolve any issues that are associated with client deposits and withdrawals.

#Miscellaneous

• Visa will invest USD 1 billion to develop financial services in Africa over the next five years.
• Tayyab, the first Islamic fintech company, has launched its services in Turkey based on infrastructure provided by Insha Ventures’ FLYP platform.
• The International Development Finance Corporation (DFC) and Mastercard will collaborate to increase support for financial institutions, agricultural technology companies and other businesses that participate in the digital Mastercard Community Pass Program, which is designed to address the infrastructural challenges that arise from the digitization of rural communities.
• Google Pay has been licensed to operate as a payment institution in Brazil. This will allow the company to offer users more payment options through its platforms in the country.
• German digital payment processing company epay will work with UnionPay to integrate the QR code payment service in Europe. This means that QR code payments will be available to Chinese tourists and other UnionPay card users around the world.
• MEPs has proposed a 10^th set of amendments to the Law on Artificial Intelligence. The amendments are focused on criteria for classifying artificial intelligence systems as “high-risk”.

Ukraine:

• The National Bank of Ukraine has united 14 systemically important banks into one “power banking” network that can function even during power outages due to Russian shelling.
• Presidential adviser Rostislav Shurma has initiated the 10-10-10 Reform Project, which introduces a tax on cash withdrawals.
• The UN Refugee Agency, together with the Stellar Development Foundation, will use blockchain technology to make cash payments to internally displaced persons (IDPs) in Ukraine.
• The Ministry of Digital Transformation of Ukraine, the WhiteBIT exchange, the Filecoin Foundation and the Atlantis World metaverse will launch free blockchain courses.
• The nominees for PaySpace Magazine’s FinTech Expert of the Year award spoke about the achievements their companies had during this difficult year as well as the importance of Ukrainian fintech companies continuing their fruitful and profitable work.
• Fintech startup Online Cashier, together with Visa, is launching a new service for accepting payments and accounting for goods via Telegram chats.
• Andrey Ryabchuk, the founder of Akurateco, discusses how open banking is being introduced in Europe and what difficulties Ukraine may face in the process of implementing this concept.
• Nikita Izmailov, the founder of the N1 Fintech Fund, discusses how how Ukrainian fintechs feel during the war as well as how he turned sportbank and the N1 Fintech Fund into successful projects.
• Finance.ua reveals how the first crypto card in Ukraine, which was issued by Mastercard, Unex Bank and fintech startup Weld Money, works.

Kazakhstan:

• Binance has signed a memorandum with the authorities of Kazakhstan to launch an educational program on blockchain engineering and compliance in 22 universities operating in the country.
• The National Bank of Kazakhstan (NBK) and the Center for the Development of Payment and Financial Technologies of the NBK (TsRPFT) have published a white paper covering the results of a study on introducing the digital tenge.
• According to the think tank of the Association of Financiers of Kazakhstan, the share of non-cash transactions in the country have increased from 77% last year to 82% this year.
• Kazakhstani banks have received permission from OFAC (a division of the US Treasury Department) to carry out transactions with MIR system payment cards.
• Speaking at Umay Angels Day, venture investor Murat Abdrakhmanov noted that CIS jurisdiction may become a red flag for investors from foreign countries.
• Red Mad Robot Central Asia examines how global technology trends affect the development of fintech in Kazakhstan.
• Alim Khamitov, the founder of UMAY Angels Club, discusses how the venture investment market is developing in Central Asia and where business angels can find like-minded people.

Kyrgyzstan:

• The National Bank of Kyrgyzstan plans to create a digital currency following the passage of the draft On the Main Directions of the Development of Payment Systems for 2023–2027 regulation.
• The Digital Kyrgyzstan Forum will be held in Bishkek on March 15, 2023. Key topics this year include fintech as a culture of the banking industry, the cryptocurrency industry and the digitalization of public services.
• The Ministry of Finance of the Kyrgyz Republic has launched a new digital treasury bond instrument for non-cash mutual settlements.
• Nurlan Mamytov, director of CJSC Alfa Telecom, has stated that the introduction of a fintech platform that allows full-fledged internet banking and access to the stock market for private investors is a key aim of the mobile operator MEGA.
• The Payment Gateway has launched in Kyrgyzstan. The new digital platform facilitates financial transactions through commercial banks, Pay24, Umai payment terminals, settlement accounts, MegaPay, Mbank and ELSOM mobile applications.
• Kyrgyz banks have refused to service Russian Mir cards in order not to fall under US sanctions.
• Russian cryptocurrency platform Bitbanker has launched SWIFT transfers. The platform allows users to withdraw dollars into foreign bank accounts. Transfers go through Kyrgyz partner Aiyl Bank.

Uzbekistan:

• The Central Bank Cyber Security Center (CERT-CBU) has launched its website. Visitors will be able to notify CERT-CBU about cybersecurity incidents in the banking sector as well as verify links to sites using the names and trademarks of financial institutions in Uzbekistan.
• Rustam Rakhmatov, the founder of BNPL startup IMAN, discusses how to successfully scale up to foreign markets.
• The National Agency for Perspective Projects of Uzbekistan has issued the country’s first licenses to carry out activities with cryptoassets. Licenses were granted to Crypto Market LLC and Crypto Trade NET LLC.

Azerbaijan:

• Binance is ready to help the Central Bank of Azerbaijan create mechanisms for the regulation of cryptoassets.
• Mastercard is supporting the digitalization of Azerbaijan’s financial sector and is ready to provide technological and other solutions to local fintech companies.

Armenia:

• Over 200 participants attended the Silicon Mountains International Technology Summit in Yerevan.
• Converse Bank has launched a new tool for contactless cashless payments. The C-POS mobile app facilitates this by turning an Android smartphone into a payment terminal.

Georgia:

• Turkish fintech as a service (FaaS) company Birlesik Odeme plans to begin operations in Georgia.