Will central and commercial banks negatively disrupt innovation?

Opinion

“Deploying well-designed central bank-issued digital currencies can transform our societies into modern, innovative, more resilient and very user-centric economies. could even be risky from a national and global security point of view, ”writes Amnon Samid, a CBDC expert

Amnon Samid 10:4302.11.21

To meet customer expectations, banks and financial institutions need to rethink both their mindset and their technology. APIs, conversational AI, digital checks, biometrics, fast payment platforms, and mobile payments are some of the flags that the old-fashioned banking system is proud of when trying to be accepted. in the “innovation club”. Central banks are even “more courageous” and most of them (almost 90%) discuss or evaluate, and a few are already experimenting, with central bank digital currency (CBDC), based on an adaptation of crypto currencies, to stay “cool” as generations Y and Z approach, who are fascinated by cryptocurrencies and stablecoins.

Will Generations Y and Z really be happy with a digital currency that will allow a government to monitor, analyze, control and restrict citizens’ finances at will, without offering any attributes for improving respectful citizens? laws ?

Amnon Samid, CBDC expert at the Digital Euro Association and BitMint. Photo: BitMint

In fact, this so-called privacy is an illusion. The vast majority of cryptocurrencies are not anonymous, but simply pseudo-anonymous. The digital transactions introduced by the most popular mobile payment applications also leave traces of data that can reveal the identity of the parties to the transaction. Additionally, current digital transactions as well as cryptocurrencies rely on the underestimated assumption that the complexity of their algorithms will withstand faster computer attacks. Unfortunately, the crypto-based CBDC won’t save the day. The threat is real. All the national money could be threatened by a bad smart actor and certainly by quantum computers, if not today, maybe in the future, when the state of the technology is sufficiently advanced.

But what seemed far-fetched a long time ago (before Bitcoin appeared), a technology for money based on quantum-grade chance, may now become a reality, achievable and well received by consumers and businesses, which can benefit not only from resilience, but many of the features not possible today, even with cryptocurrencies.

Banks will no longer be able to rely solely on updating their legacy technology. Patches and middleware fixes are not enough, as we are at a technology turning point that is dramatically changing the world. Innovation should start with the money itself, how it is minted and written, stored and traded.

The Chinese central bank was the first to jump on the bandwagon and used an Israeli group, BitMint, to design and build a payment platform based on a new financial alphabet, which is cybernative, comprehensive, applicable to digital coins. in his digital wallet, to cash his bank account, as well as for credit, debt and investment instruments. Realizing the growing risk for most crypto currencies and payment rails that rely on crypto key exchanges, they discovered that this architecture fights the growing threat of quantum computing because it relies on randomness. quantum, AI and nanotechnology to ensure a sustainable foundation. for quantum secure transactions, preventing fraud and abuse.

This story of the Israel-based group, which was rejected locally eight years ago and has been warmly adopted abroad, demonstrates a painful situation. Israel-based fintech, paytech and insurtech companies are demonstrating their innovations primarily outside of Israel. Some may argue that this is due to regulatory constraints, but it seems more due to a lack of entrepreneurship and national vision, which are very characteristic of other areas of Israeli society.

Being a “last bloom” in the CBDC challenge opens up an opportunity for the Bank of Israel to paradigm shift, skipping the vulnerable solutions on which some CBDC pilots are hinged. In order to be at the forefront of global finance, it is advisable to elevate money from a simple number written in a memory location to an ID, allowing crypto tools to lock onto that identity and to govern the use of money for the benefit of society.

Digital innovation must be based on fundamental values. That’s why we are developing a suite of user-centric solutions, expressing usability and purpose. We recognize that digital currencies can not only reshape the world of finance, but that they will foster the emergence of fair and inclusive global digital finance with increasing ripple effects across many areas of sustainable development across the world. world.

Amnon Samid is CBDC expert at the Digital Euro Association and at BitMint

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