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Industry roundup: 6 October

Citi advocates holistic digital policy

Citi is recommending that governments develop digital policy alongside their monetary and fiscal policy as a 'third tool' in helping manage economic growth and achieve sustainability goals.

The group's latest Global Perspectives & Solutions (Citi GPS) report, Holistic Digital Policy – Nation States MustLead in Building Equitable Human-Centric Digital Economies, sets out several focus areas designed for countries and governments to assist in the process of moving to a more digital economy, including artificial intelligence (AI), inclusive finance, digital infrastructure, private-sector incentives, and regulations.

The Citi GPS report suggests that each nation-state develop and implement a holistic digital policy that complements monetary and fiscal goals and facilitates sustainable economic growth and inclusion. The plan also aims to incentivise and align other stakeholders such as corporates, financial institutions, civil society and individuals to achieve the collective economic and UN Sustainable Development Goals. The report outlines five focus areas that are adopted alongside digital policy including digital infrastructure, data, AI and biotech, technology monopoly, and digital finance.

A new tool

Naveed Sultan, Chairman, Institutional Clients Group, Citi, commented: “We believe that we are at a unique point in time where there are major transitions underway, driven by varied and complex externalities and the rapid development of a broad range of general-purpose technologies. We, therefore, need new policy tools and business approaches to address the challenges and opportunities presented by these externalities. We believe that a Holistic Digital Policy is a new tool that will complement monetary and fiscal policies, which are currently showing signs of stress, and also improve their efficacy.”
There is evidence that countries which have established a holistic approach to digital policy and execution have realised significant economic, social, and political benefits. These countries have also seen a thriving public-private sector collaboration. That’s in addition to continuing to engage in cross-agency, cross-government, and private sector collaboration on topics such as the development of central bank digital currencies, cybersecurity, and data privacy. Ultimately, forward-thinking governments need to take decisive steps to close the gaps in digital skills, infrastructure, and research and development.”

Among the report's recommendations, it suggests that to successfully adopt the digital policy, governments should establish frameworks for global collaboration whilst pursuing long-term visions, inspired by the ESG concept of cross-stakeholder collaboration to achieve sustainable and equitable economic growth.
Dalibor Vavruska, Founding Partner, Digiteccs Associates added: The technological revolution is improving the efficiency of organizations across sectors and countries, is empowering economic inclusion, and could provide solutions to systemic challenges such as climate change. However, it also presents risks such as job displacement together with other adverse impacts and a breakdown of global governance.  Therefore, It is important that countries and governments work together to shape these technologies to optimize the outcome and manage the risks.”

The digital copy of the report is available here

HKMA seeks answers to central bank digital currency questions

The Hong Kong Monetary Authority (HKMA) has struck a cautious note on the topic of central bank digital currencies (CBDCs), outlining seven issues that need to be addressed ahead of any introduction of a digital Hong Kong dollar (e-HKD).

In a technical perspective paper, the HKMA considers "potential architectures and design options that could be applied to the construction of the infrastructure for distributing e-HKD". The Authority stresses that the paper should not be regarded as an endorsement of CBDCs, but aims to initiate a conversation about how one could be implemented.

Areas that Hong Kong's central bank is keen to address include how cross-ledger synchronisation among participants in a CBDC should operate, how to prevent an oversupply of e-HKDs, ensuring privacy, and allowing both wholesale and retail uses of a digital dollar.

Seven pain points

The HKMA indicates that it does not oppose the concept by considering four options for distribution models and two viable designs. At the same time, it suggests that each of the following issues would need to be addressed before an e-HKD could be launched:

•      Privacy to provide user anonymity and also to allow any manipulation to be detected;

•      Interoperability between existing financial market structures and emerging fintech systems that use different cryptocurrencies or blockchains;

•      Performance and scalability as potential security overheads could make CBDCs less useful, and also due to the need to handle large numbers of users;

•      Cybersecurity – Defining attack vectors and standards to repel attacks, to ensure resilience and transaction security;

•      Compliance so that a CBDC doesn't hinder measures designed to curb money laundering, or circumvent laws against financing terrorism;

•      Operational robustness and resilience – The system should be able to cope with sudden spikes in demand for digital currencies, and connectivity should have accompanying failsafes;

•      Technology-enabled functional capabilities – Do CBDCs improve the existing business? What features are needed to deliver benefits current payment mechanisms do not?

"Academia and industry are invited to comment on the proposed architecture by making reference to the seven problem statements," the paper concludes. "It is believed that input to these problem statements has a great potential to lead to optimised designs of CBDC. New ideas and project proposals are also solicited."

KPMG will spend US$1.5bn to step up ESG initiatives

KPMG plans to spend more than US$1.5bn over the next three years "specifically to focus on the environmental, social and governance (ESG) change agenda".

The firm says that the ESG strategy aims to support clients in making a positive difference, and is underpinned by recognition of its responsibility to improve its impact on the world and the ESG commitments outlined in its KPMG: Our Impact Plan document.

"The world faces a crisis on multiple fronts, which is why we're putting the environmental, social and governance agenda at the heart of everything we do," said KPMG's Global Chairman and CEO, Bill Thomas. "ESG will be the watermark running through our global organisation, from empowering our people to become agents of positive change to the services with our clients and our partnerships with critical stakeholders."

Action plan

The Big Four auditing firm said that its investment will be directed towards training its 227,000 workforce to set and assess sustainability targets, buying specialist firms, and opening regional hubs around the world to help companies improve their carbon footprint, supply chains and labour practices.

KPMG also plans to set up five dedicated hubs offering expertise and solutions on key ESG issues, these will focus on:

  • Global Decarbonisation, helping large multinational businesses meet their net-zero commitments and plan their decarbonisation journey, and
  • Global ESG Advisory, backed by advisory teams from KPMG firms, offering ESG expertise including leadership on societal issues and solutions.
  • Three KPMG regional ESG Hubs will also be established in Europe, Asia-Pacific and the Americas to allow clients easy access to insights and expertise across the ESG agenda.

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