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Money in a digital world, or the expansion of digital-first payments

The first afternoon ​on the main stage at ICT Spring​ offered ​a captivating program centered around all the aspects of money in a digital world, hosted by Luca Mancuso, Business Development Associate at the LHoFT. New forms of money and alternative payment systems are emerging. Digital payments have been gaining momentum while the use of cash has been in decline.

Coins, Cryptocurrency, and Regulation: Paving the Way for a Cashless Future

Nasir Zubairi, CEO of the LHoFT Foundation, and Nameer Khan, Chairman of MENA FINTECH ASSOCIATION & Founder of Fils, took the stage at ICT Spring to kick off the afternoon session. Together, they delved into whether we are heading towards a cashless society. During their opening fireside chat, these two influential figures in the Fintech industry highlighted the transformative impact of mobile and digital payments on the traditional cash market. They nevertheless emphasised that the true frontier lies in digital currencies. As the popularity of new cryptocurrencies continues to soar, central banks find themselves at the forefront of this rapidly evolving landscape. They play a pivotal role in the introduction of central bank digital currencies (CBDCs), which hold the potential to revolutionise payment systems. CBDCs promise faster, cheaper, and more efficient domestic and international payments. They also provide enhanced security measures and a reduced risk of fraudulent activities, thanks to the integration of blockchain technology.

Following this fireside chat, Karen O’Sullivan, Head of the Innovation, payments, market infrastructures and governance Department, and Natasha Deloge, Head of Innovation Division at the CSSF, the public institution which supervises the professionals and products of the Luxembourg financial sector, discussed the role of the regulator in fostering innovation in the financial industry. Very clearly, both stated that innovation affects all financial sector activities and increasingly reshapes how these activities are carried out and how clients use the related financial services. Hence why it is paramount for the CSSF to remain proactive and look further than the horizon of regulation while engaging in constant dialogue with the innovators. This said, the CSSF has created an Innovation Hub, consisting of a dedicated point of contact for anyone wishing to present an innovative project or exchange views on the major challenges faced by financial innovation in Luxembourg.

After this discussion, we moved from Luxembourg to Europe with Andréa Toucinho, Country Ambassador for France and a prominent figure in the European Women Payments Network (EWPN). As the Director of Studies, Prospective, and Training at Partelya Consulting, she provided an insightful presentation on the current landscape of European payments in 2023. Andrea covered many topics, including an in-depth examination of regulatory frameworks encompassing PSD2, PSD3, GDPR, AML, MiCA, and eIDAS2. On top of this, she explored the aspirations of EU regulators striving for a unified approach to advancing and utilising electronic payments while acknowledging the concern regarding accessibility to cash for European citizens.

Highlighting the European Payment Initiative (EPI) as a significant milestone, she presented the challenges faced by European sovereignty in light of this project, which aims to establish a domestic payment scheme based on instant payments, thus fostering competition against global players such as Visa, Mastercard, and prominent internet giants. EPI recently raised attention in Luxembourg following its acquisition of Payconiq International. Andrea eventually delved into some perspectives around the payments industry, detailing emerging technologies such as AI and biometrics, the projects of central bank digital currencies (CBDCs), and the challenges addressed by crypto assets.

Next Gen Payments: the new frontier

Continuing the exploration of money in the digital world, a round table discussion entitled “Capturing the Opportunities of Next-Gen Payments” followed, featuring Ananda KautzHead of Innovation, Digital Banking, and Payments at ABBL; Romain Swertvaeger, Fintech Leader and Partner at EY Luxembourg; Jérémie Rosselli, General Manager of N26 France & Benelux; Sara BerujonCountry Product Head for J.P. Morgan SE, Luxembourg Branch, J.P. Morgan Payments; and Kaspar Wansleben, Managing Director of the Luxembourg Microfinance and Development Fund. Next-Generation Payments encompass various digital wallets and account-to-account transfers that continue to gain popularity, compared to the traditional forms of payment. This shift in consumer preferences has a profound impact on banks and their competitiveness.

To tackle this challenge, traditional banks must adapt by embracing new payment channels and establishing strategic partnerships with emerging players such as Fintechs and Neo-Banks. The ongoing journey towards more digital, open, and real-time payments mirrors the evolving habits of society, which is increasingly “living” online. This trend paves the way for post-generation payments i.e. the metaverse and highlights the importance of addressing fraud risks and bridging the persistent financial inclusion gap.

In the next keynote speech, security and fraud management were among the top 3 challenges Jonathan Prince, Co-founder & CSO at Finologee, addressed. He delved into the latest trends and strategies in corporate payments, highlighting the need to use multiple systems and access real-time data and top of an efficient security and fraud management system. Jonathan discussed the challenges introduced by adopting cryptocurrencies and Blockchain technology, particularly in verifying counterparties and tracking transactions.

To further explore the compliance aspects of crypto assets and transactions, Julie Bourgeois, Head of Legal and Compliance at 6 Monks (6M), and Frank Roessig, Member of the ALCO (Association of Luxembourg Compliance Officers) & Digital Trust Solutions at Proximus discussed strategies for navigating compliance in this domain. Two key takeaways emerged from their discussion were: 1) establishing robust governance practices as a priority, and 2) ensuring the implementation of thorough KYC (know-your-customer), KYT (know-your-transaction), and KYA (know-your-assets) protocols. Similarly to KYT, KYA involves gathering financial data to assess the risk associated with a cryptocurrency address. It serves the purpose of identifying any connections between a cryptocurrency address and fraudulent activities.

On the road to DeFi (Decentralised finance)

Continuing the exploration of the new frontier of payments, the first-afternoon session at ICT Spring delved deeper into the road to DeFi (Decentralised Finance) – an umbrella term encompassing various financial applications in cryptocurrency or blockchain that aim to disrupt traditional financial intermediaries.

The first engaging fireside chat featured Hao Wang, Chief Operating Officer & Co-Founder, and Frank Sui, Founder and CEO of MetaBank. The latter is a blockchain-powered company driven by a vision to revolutionise the world by fostering digital inclusion and accelerating the transition to digital civilisation. Their mission focuses on leveraging blockchain technology to enhance the growth of developing countries in Asia, serving as a powerful testament to how finance can empower people in the digital age.

A thought-provoking Round Table on “Blockchain Technologies, Digital Assets & Virtual Currencies: A Threat or an Opportunity for the Financial Sector?” occurred afterwards. The participants included Nadia Manzari, Lawyer and Public Speaker; Nestor Verrier, General Manager at Swissquote Bank Europe; Julien Gratz, Managing Director of LëtzPlay; and John Cronin, CEO of Zodia Custody Ireland. This discussion highlighted how blockchain technologies, digital assets, and virtual currencies have emerged as significant disruptors in the financial sector, presenting both threats and opportunities.

While the threats cannot be ignored, including compliance and security concerns, as well as volatility that may lead to speculative bubbles, the panellists emphasised the vast opportunities that lie ahead. These opportunities include enhanced efficiency and transparency, greater financial inclusion, the emergence of new investment opportunities through tokenised assets, and cheaper cross-border transactions improving remittance services, international trade, and financial connectivity.

Following an incredibly dynamic afternoon, the LHoFT, in collaboration with Tokeny and the Luxembourg Blockchain Lab, organised a side-event to unveil an exclusive report on DLT-based securities registers. This report provides an in-depth exploration of how this revolutionary technology tackles the challenges inherent in traditional systems while simultaneously enhancing transparency, efficiency, and security. The launch event was followed by a panel discussion moderated by Gildas Blanchard, ALFI Senior Industry Affairs Adviser specialising in Risk Management & Digitalisation. The panel featured distinguished experts, including Patrick Hennes, Head of Transfer Agency Development & DLT at DZ Privatbank S.A., Romain Gonthier, Senior Legal Counsel at Blocktrade, Pavel Izmaylov representing APEX Group, and Martijn Siebrand, Innovation Manager Digital Assets at ABN Amro. The discussion delved into the intricacies of DLT-based securities registers, offering valuable insights from these industry leaders.

Report: https://lhoft.com/white-papers/luxembourg-the-epicenter-of-the-tokenization-era-whitepaper/

This side event effectively concluded the first day of ICT Spring before the launch of the famous ICT Spring Party.