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Euro reaches a two-decade low – Industry roundup: 24 August

Euro reaches a two-decade low

The resurgent dollar and the likelihood of a challenging winter for the region caused the euro to drop to a new two-decade low according to Bloomberg. Strategists predict that the currency will continue to decrease after this point.

Reports indicate that the euro decreased as much as 1.1% to 0.9928 earlier this week, falling below the previous two-decade low of 0.9952 in July. It saw a short relief that propelled it to around $1.03 earlier this month before falling again. The currency was trading at levels last seen in 2002, just a few years after it was introduced. The Bloomberg Dollar Spot Index increased 0.7%, reaching its highest level since 15 July.

According to Morgan Stanley, the euro is expected to fall to $0.97, the lowest level since the early 2000s. Nomura International Plc expects the euro to trade at $0.975 by the end of September, after which the market may reach the $0.95 level or even lower as energy supply constraints may increase the risk of blackouts and potential increases to euro imports.

On Monday, the euro hit a new seven-year low against the Swiss franc, and further signs of a recession is expected to push it lower against the currency. According to strategists from Goldman Sachs Group Inc., the two could potentially fall to the high 80s or low 90s centimes per euro in the event of a severe economic downturn, due to the limited Russian gas supply.

Meanwhile, despite a rise in UK bond yields, the pound is said to be close to a two-year low against the dollar. According to Kit Juckes, Foreign Exchange Strategist, Societe Generale SA, leveraged funds are the highest to the pound since March 2020 according to the data from the Commodity Futures Trading Commission for the week ending 16 August, attempting to set a potential short. Additionally, these funds' traders reportedly also increased their euro short positions to the highest level in three weeks.

Combating card fraud for financial institutions via Rippleshot and Flashpoint alliance

Rippleshot, a provider of fraud detection and prevention solutions to payment processors and financial institutions, has partnered with Flashpoint, a recognised global provider of data intelligence. The alliance combines Rippleshot's data and insights on compromised and high-risk merchants with Flashpoint's Payment and Credit Card Fraud Mitigation solution.

According to Rippleshot, its cloud-based solution uses a regularly updated data group of over 4,500 financial institutions. Additionally, it includes AI/ML automation and data-driven strategies. This technology is aimed at helping financial institutions to improve their current fraud prevention strategies, efficiently identify compromised cards, data breaches, and high-risk merchants, and also save time and resources by utilizing Rippleshot's comprehensive data and solutions.

Flashpoint’s Card Fraud Mitigation solution works to identify high-risk merchants before fraudulent transactions happen or become more prevalent, as well as identifying compromised credit cards from illegal communities and data breaches. Flashpoint aims to use Rippleshot’s capabilities to recognize stolen cards and the specific merchants who have been compromised.

As a result, financial institutions and card issuers can expect to identify potential card fraud victims and risky merchants, as well as to detect fraud loss earlier or prevent it.

Matt Howell, SVP of Product, Flashpoint, commented that Common Point of Purchase (CPP) analysis is a complicated process for fraud workgroups. However, the integration of Rippleshot's high-risk merchant data into the data intelligence platform plans to accelerate and scale the detection of potential fraud across CPP, enabling the teams to focus on fraud prevention by having the finalized analysis across multiple financial institutions.

DTCC introduces a settlement platform powered by DLT: Project Ion

The Depository Trust and Clearing Corporation (DTCC), a US-based post trade financial services firm that processes the majority of trades in the US stock market, has created Project Ion, an alternative settlement platform that uses distributed ledger technology (DLT) to expedite trades for clients.

According to DTCC, Project Ion officially launched in a separate production environment, with an average over 100,000 bilateral equity transactions per day in parallel processing, while traditional settlement systems continue to be the official record. Reports indicate that the new platform, which uses R3's Corda DLT software, was created in collaboration with a diverse group of industry participants and fintech firms, including BNY Mellon, Citadel Securities, Goldman Sachs, Robinhood and State Street. DTCC expects that Project Ion will eventually provide clients with a robust, safe and scalable alternative settlement service. They plan to support a netted T+0 settlement cycle, as well as T+2, T+1, and extended settlement cycles.

Murray Pozmanter, Managing Director and President of Clearing Agency Services and Head of Global Business Operations, DTCC, stated that Project Ion represents a significant advancement in the financial markets' digitalization, potentially creating new possibilities for the sector's growth in terms of efficiency, risk management and cost savings.

DTCC is reportedly developing a phased rollout of the platform with the goal of extending it to DTCC subsidiary National Securities Clearing Corporation (NSCC) in order to benefit from NSCC's central counterparty (CCP) trade guarantee for each cleared transaction.

Australia’s Treasury prioritizes “token mapping” to support cryptocurrency regulation

The Treasury Department of Australia has released a statement that it is preparing to conduct "token mapping" as part of its efforts to adopt rules for the cryptocurrency sector. The project's goal is to compile a list of the different types and applications of digital currencies used in the nation. Per reports, this should become a first step toward determining which crypto assets would be regulated as well as the outlining the process that will follow.

Australia is reportedly becoming the first country to inventory cryptocurrency holdings. Jim Chalmers, Treasurer of Australia, stated that “with the increasing popularity of crypto assets, to the point where crypto advertisements can be seen plastered all over major sporting events, Australia needs to ensure that customers who engage with crypto are adequately informed and protected.”

After years of deliberation about how to regulate cryptocurrencies that are decentralized, in addition to the rise in cryptocurrency investments caused by remote work and stimulus payments made during the pandemic, the department is expected to move forward with more controls. Additionally, the Australian Securities and Investments Commission (ASIC) recently stated that the growing popularity of cryptocurrencies makes a compelling case for regulation, adding that according to a survey, 44% of the country's retail investors held cryptocurrency in late 2021.

Chalmers referenced the token mapping as the first step in a reform agenda, following the Australian Taxation Office's decision to prioritize capital gains from cryptocurrency assets in order to ensure accurate reporting.

Deutsche Payment and Token collaborate on open banking towards potential cashless society

Deutsche Payment has aligned with Token, an open banking provider, and is expected to launch "PayThisWay", an account-to-account payments service powered by Token's open banking platform. The company's white-label-ready platform is intended to help payment providers like Deutsche Payments efficiently launch and manage open banking-enabled payments.

In terms of transfers and payments, Deutsche Payment anticipates a secure and effective cashless society through PayThisWay in European markets. According to Deutsche Payment, open banking payments are projected to exceed US $116 billion in 2026, up from around US $4 billion in 2021, representing a 2800% increase in just a few short years. The company also predicts that Europe will take the lead and make up 75% of the market by 2026.

Reports indicate that traditional payment methods, such as cards and cash-on-delivery, are expected to account for less than a third of global e-commerce transaction value over the same time period. Open banking and account-to-account payments are expanding significantly and are expected to play a major role in the future of the payments services, according to Alexander Herbst, CEO, Deutsche Payment. Todd Clyde, CEO, Token, stated that PayThisWay will enable high-converting, low-cost transactions while providing consumers in Germany and elsewhere with a superior user experience.

Over 210 million potential end users of open banking payments are currently within Token’s network of connectivity, processing tens of millions of open payments annually for more than eighty banks, gateways and payment service providers.

CBDC Track confirmed by InvestHK and HKMA for Global Fast Track 2022

Central bank digital currency (CBDC) exploration continues to gain traction from central banks around the world. The inclusion of a CBDC track in the Global Fast Track 2022 has been officially confirmed by InvestHK and the Hong Kong Monetary Authority (HKMA), with expectations for regional and international businesses to collaborate with the central banking institution in efforts to accelerate the growth and adoption of financial technology throughout Asia and other regions.

The CBDC track is said to welcome banks, fintechs and tech companies to submit cutting-edge solutions in eight focus areas, such as retail CBDC (rCBDC) adoption, wholesale CBDC (wCBDC) adoption, programmable money, interoperability, privacy, cybersecurity, foreign exchange and liquidity management, and offline payments. Qualified candidates may also have the chance to work with the HKMA on research projects and pilots to support the expansion of the CBDC.

According to reports, Hong Kong has recently emerged as an economic hub of CBDC development and research, with the HKMA actively guiding the exploration of both wCBDC and rCBDC. The CBDC track launch is said to demonstrate commitment to the sector's growth while facilitating new technologies aimed at improving the financial system. Reports indicate that applications for the CBDC track are currently being accepted, with a deadline of mid-September 2022.

India plans to sell at least 51% stake in US $5 billion IDBI Bank

India’s central government is reportedly considering selling at least 51% of the state-owned IDBI Bank Ltd. Officials from the government and the state-backed Life Insurance Corp. (LIC) of India, which are said to own approximately 94% of IDBI Bank's shares, are discussing how much of their stakes they intend to sell. Both parties are expected to retain a stake in the lender following the sale.

The final decision on the deal's structure is expected to be made by a panel of ministers, with the government and LIC seeking to gauge buyer interest as early as the end of September 2022. IDBI Bank shares have reportedly risen 6.3% during the last year, with a market value of approximately 424.7 billion rupees ($5.3 billion).

Additionally, officials intend to relinquish management control. According to Bloomberg, the Reserve Bank of India will allow investors to purchase stakes greater than 40%. Normally, entities governed by the regulator must seek permission to purchase stakes above that threshold, whereas non-regulated firms are limited to purchases of 10% to 15%.

Reports indicate that easing eligibility requirements could broaden the number of potential buyers, boost the government's privatization plans, and strengthen its finances as it seeks to collect 650 billion rupees in disinvestments this year. It has reportedly raised more than a third of the target, primarily through LIC's $2.7 billion IPO.

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