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Kazakhstan legalizing cryptocurrency amid Russian migration – Industry roundup: 30 September

Peer-to-peer validation of digital euros to require more examination; deferred until 2026 per ECB

The European Central Bank states that before a digital euro can be introduced, specific measures must be taken, including an examination of front-end services that financial intermediaries might be able to offer, the distribution of the currency to users, and the settlement of payments, potentially delaying availability until 2026.

Reports indicate that one apparent stumbling block is offline use, in which transactions are validated peer-to-peer rather than through online verification executed by individual financial institutions. According to the ECB, there is greater uncertainty regarding this solution’s time to market. If timely delivery of a peer-to-peer validated solution for offline payments is deemed technically unfeasible, reports state that the development of a third-party validated solution for online payments should not be postponed.

The Governing Council, per the EU central banks, will reportedly make a decision during the latter part of 2023 on whether to begin a "realisation phase" to cultivate and assess the proper technological solutions and business frameworks required to implement a digital euro. The central bank also estimates that this initial stage could last three years. A final determination on the potential issuance of a digital euro may not be established for some time, stated reports. It is said to be contingent on legislative developments as well as regulations to define and administer key facets of the digital euro, which the European Parliament and the Council of the EU will address in response to a proposal by the European Commission.

Fabio Panetta, an ECB board member, stated that policymakers will collaborate immediately to create a strategic framework for the digital euro, adding that having a set of initial procedures will be of high importance to develop digital euro solutions quickly if the digital euro is introduced in the future.

Panetta further emphasizes that the prototype currently under development with Amazon has minimal impact on future plans for broader participation in the project. They expect to collaborate with various stakeholders, such as intermediaries, consumers and retailers, on receiving their perspectives and expertise on the digital euro development.

Billtrust, a payments firms, transitions to private status by EQT acquisition; US $1.7 billion deal

The Swedish private equity firm, EQT, has agreed to purchase Billtrust, a NJ-based company reportedly building a gateway to automate the invoice-to-cash process, for US $1.7 billion in an all-cash transaction. The transaction, approved by the board of directors of Billtrust, is anticipated to close in Q1 2023, pending approval from Billtrust's shareholders and regulatory bodies. Billtrust is said to have quickly expanded to provide software-as-a-service (SaaS) billing management products for businesses, including electronic billing and payments for consumer and business billing services.

Reports indicate that once Billtrust becomes a private company, shareholders can expect to receive $9.50 in cash per share, a 64% premium over the $5.77 closing price on 27 September. The partnership between Billtrust and EQT is said to provide innovation and disruption in business-to-business payments and accounts. Additionally, reports show that many companies have been competing for accounts receivable and payments cycle management business.

Deutsche Bank and Synthesized alliance aims to deliver synthetic data for AI and ML testing

Deutsche Bank has collaborated with Synthesized, a data generation platform provider, to improve its data capabilities. The bank's Corporate Venture Capital (CVC) group is investing an undisclosed amount in the technology firm as part of the collaboration.

Synthesized offers data and engineering teams the ability to create and share data by leveraging machine learning and automation services. Reports indicate that Deutsche Bank and Synthesized are currently collaborating to improve privacy and security, accelerate the adoption of AI/ML-powered client insights, and make better use of data.

Deutsche Bank's engineering teams plans to use Synthesized's platform to access synthetic test data, which will reportedly enable them to accelerate testing, obtain accurate results and minimize the time to market. The bank expects the synthetic, non-traceable versions of original datasets to assist them in experimenting with large datasets for AI/ML use cases and other new technologies.

Gil Perez, Chief Innovation Officer and Head of Corporate Venture Group, Deutsche Bank, stated that Synthesized's goal is to facilitate simple and rapid access to secure, compliant, high-quality synthetic data. The bank expects to speed up the cloud-based application transitions, data analysis, experimentation and testing in the cloud, enabling them to boost the productivity of its data and the pace of its innovation.

Reports indicate that the CVC at Deutsche Bank is mainly concentrated on investing in fintechs and technology start-ups that can improve the customer experience, develop new banking and financial services, or boost productivity for the bank. Synthesized has reportedly now joined the CVC portfolio of the bank, which also consists of SkyHive, Tania, and SeaLights.

SWIFT and Chainlink collaborate to build token connectivity via cross-chain protocol

SWIFT is looking into ways to interact with blockchain assets. According to reports, SWIFT is collaborating with Chainlink, a blockchain oracle network provider, on a cross-chain interoperability protocol (CCIP) in an initial proof-of-concept. The CCIP protocol would enable SWIFT messages to instruct on-chain token transfers, allowing the interbank network to communicate across all blockchain ecosystems. Sergey Nazarov, Co-Founder, Chainlink, stated that this will help accelerate the adoption of distributed ledger technology (DLT) blockchains and benefit various institutions across capital markets. Furthermore, financial institutions can expect to become blockchain-capable without incurring high upfront costs or development challenges.

Jonathan Ehrenfeld Solé, Strategy Director, SWIFT, stated that institutional investors have great interest in cryptocurrency, and traditional finance (TradFi) players would also like to have access to a variety of digital and traditional assets on a single network that can link to various asset classes. The collaboration between Chainlink and SWIFT in cross-chain interoperability could help TradFi institutions close the gap between traditional and digital assets, said Solé.

Reports indicate that interoperability has grown in popularity in recent months, claiming it as the next big development for not only crypto investors but also TradFi investors looking to diversify into digital assets. The cryptography network Lit Protocol reportedly raised a US $13 million Series A round led by crypto investment firm 1kx to hire developers to create decentralized ownership and interoperability across protocols. Additionally, numerous Solana-based projects joined forces to create the Open Chat Alliance, an interoperable messaging platform, last month.

BNY Mellon releases new ESG ratings for securities lending

BNY Mellon has revealed new enhancements to its securities finance platform to assist clients in analysing their agency securities lending program in conjunction with their sustainability objectives, as demands for greater transparency in relation to environmental, social and governance (ESG) investing for businesses worldwide continue to rise.

Clients can expect to apply ESG scores based on third-party data across their lendable portfolio, collateral and cash investments via an interactive dashboard to help them assess consistency with their individual ESG goals, stated reports.

This new functionality is said to become the first of several ESG improvements that BNY Mellon, the world’s largest agent lender with access to more than US $4.3 trillion in lendable assets, plans to make to its platform. According to Ina Budh-Raja, EMEA Head of Securities Finance Product & Strategy and Global Head of Markets ESG, BNY Mellon, “transparency is critical to the evolution of the ESG investing landscape, as well as the management of ESG risks and regulatory compliance.” BNY Mellon plans to provide clients with next-generation solutions and insights to help them achieve their ESG objectives.

The new dashboard is expected to make use of MSCI ESG Research's ESG Ratings. These ratings can be used to assess a client's non-cash collateral and cash reinvestment, which may include both outright purchases and repo collateral, said reports. Additionally, the output that is produced enables clients to assess their portfolios, such as incoming collateral and investments, in complying with their ESG objectives.

Kazakhstan prepares to legalize cryptocurrency as Russians migrate to the country

The president of Kazakhstan, the ninth largest transcontinental country in the world, stated that it is prepared to authorize cryptocurrency exchange activities after a major financial institution in Kazakhstan completed its first crypto-for-fiat transaction. Kazakhstan is prepared to legalize a mechanism for converting cryptocurrencies to cash if warrants demand, according to Kazakhstan President Kassym-Jomart Tokayev.

Tokayev stated that Kazakhstan aims to become a global leader in digital technology, cryptocurrency ecosystem and regulated mining, said reports. Additionally, the Kazakhstan government has reportedly drafted amendments in the national legislation to test and assess a cryptocurrency conversion methodology at the Astana International Financial Centre. Tokayev claims that this financial instrument may receive legal official status if it demonstrates its applicability and security.

Reports show that the Eurasian Bank and Intebix have mutually completed the bank's first regulated crypto purchase for fiat. The legality of Kazakhs buying cryptocurrency with their local currency, the tenge, has reportedly made the precedent a significant turning point in Kazakhstan's adoption of cryptocurrencies. ATAIX, Kazakhstan's largest bank, and Altyn Bank are among the other firms involved in the pilot crypto projects.

The announcement comes as thousands of Russians enter Kazakhstan after Russian President Putin announced a partial mobilization of reserves to battle in Ukraine. In response to the Treasury Department of the United States warning about sanctions, Halyk Bank suspended the use of Russian Mir payment cards.

Kazakhstan is not the only nation attempting to increase the adoption of cryptocurrencies, which have reportedly become widely known for Russians. Georgia, a neighbouring state, has also been taking steps to enact new cryptocurrency regulations in an effort to establish itself as a global crypto hub, according to reports.

While nations like Kazakhstan and Georgia seem to embrace cryptocurrency, reports indicate that Europe has grown increasingly concerned that Russians are using cryptocurrency to access their funds. The European Union reportedly intends to prohibit Russian citizens and entities from holding any assets in EU cryptocurrency wallets after limiting Russian payments to European crypto wallets to a maximum of 10,000 euros in April 2022. As reported previously, Russia has relied heavily on foreign crypto infrastructure to carry out cryptocurrency operations. The Bank of Russia has reportedly urged that no local crypto exchanges should be legalized.

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