BLOCKCHAIN & Digital Financial Services 29/11/17

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1 BLOCKCHAIN & Digital Financial Services 29/11/17 Shiva Bissessar, BSc (Hons), MBA, MSc Managing & Technical

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4 Digital Financial Services (DFS) Financial Inclusion Economic Development but its not just for the poor Expected attributes of any payment system Security & Privacy Speed & Efficiency Scalability Digital Identity

5 Digital Currency, Blockchain & DLT Decentralized digital currency e.g. Bitcoin (BTC) Litecoin (LTC) Centralized Central Bank issued digital currency (CBDC) & Digital Fiat Currency (DFC) The underlying technology of digital currency i.e. Blockchain Public blockchain e.g. Ethereum (ETH). Permissioned blockchain e.g. Corda, Hyperledger Distributed Ledger Technology (DLT)

6 Exploring Digital Financial Services (DFS) 2016 UN ECLAC digital currency study uncovered longstanding payments system deficiencies in certain territories Authorities would like to increase participation in the digital economy & entrepreneurs bemoan lack of payments mechanisms to participate in global marketplace In 2016 and 2017 the ITU held workshops for the benefit of policy makers and other stakeholders, introducing new concepts of DFS

7 Money CONVERSION POINTS Bank Agent Exchange USE CASES, EXAMPLES SERVICES MEDIUM Wire Transfer Via external payment providers e.g. Paypal Electronic Money E-Commerce Payment card Via local merchant account + internat l payment gateway FAMILIAR P2 P transfer (purchases, international remittance etc.) via MNO & MFI e.g. M-PESA Mobile Money (i) Complementary (ii) Collaborative Airtime / Credit Mobile Money Alternate Infrastructure Utility payment P2P transfer e.g. Paym NFC payments e.g. ApplePay ATM, P2P, Remittance Remittance e.g. BitPesa P2P via SMS Digital Currency E-Commerce Enable SMEs to receive payments via payment processors NOVEL

8 Caribbean Digital Currency Adoption Caribbean authorities remain focused on weaknesses and this poses a threat to development of digital currency industry in Caribbean

9 UK Approach to Digital Currency Address weakness: AML controls & BSI consumer protection Stimulate innovation: 10M for research into innovation of digital currency

10 Limited expertise and academic research in DFS landscape in Caribbean at present Some authorities have limited view on mobile money Some have been more open in working with industry to develop regulatory classes to allow for operations Potential digital currency exchange services and offering to do a CBDC / DFC pilot. Some CBs are only now examining digital currency and blockchain

11 Opportunities for development of DFS Cash in & cash out Pay utility bills P2P G2P Merchant payment Remittances; domestic & international Financing and credit

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13 Objectives Industry Building Knowledge Brokering Global Engagement Bridge the gap between policy makers and market entrants Promote responsible adoption of blockchain and DLT based systems, advising public institutions and private industry on policy, compliance, and technology

14 Focus Areas Increased participation in the Digital Economy Correspondent bank de-risking challenge Central Bank Digital Currency (CBDC) & Digital Fiat Currency (DFC)

15 Capacity building Exploration of Caribbean DFS Collaborative approach required Financial regulators, policy-makers, Innovation and entrepreneurship Service provider driven & independent research Exploration cannot be one-sided Alignment with international workstreams

16 Ransomware Ease of receiving value over the Internet comes with the cost of uptick in ransomware Ransomware takes advantage of system vulnerabilities and/or social engineering Back-up are useful, but not the answer Tools exist which can detect suspicious activity on your device & thwart attempts to encrypt you data e.g. BicDroid, CryptoDrop

17 Anonymity The pseudo-anonymous nature of Bitcoin is often confused for true anonymity. Other protocols now exist with offer greater levels of anonymity. Tracing transactions is an active field of research. Training for authorities, law enforcement should be given some emphasis e.g.

18 Opportunities for cybersecurity Caribbean has proposed/enacted cybercrime & data protection legislation and digital ID systems There is opportunity to develop Caribbean cybersecurity ecosystems Examination of blockchain could be within remit of such ecosystem

19 The $10,000 question Governance remains an issue with discord between developers and miners Behind the price appreciation is a corresponding decrease in utility as means of facilitating payments Payments and remittance providers have cited fees, speed and efficiency as rationale in switching to other digital currencies for transactions.

20 The future Caribbean institutions need to examine economic development opportunities in DFS, blockchain & cybersecurity A complimentary service provider & independent research approach is advised The monetary evolution will take place with Central Banks at the helm issuing CBDC or DFC

21 BLOCKCHAIN & Digital Financial Services 29/11/17 Shiva Bissessar, BSc (Hons), MBA, MSc Managing & Technical