BIS Reveals 2024 Vision: Quantum Security and AI in Finance Take Center Stage – Finance Magnates

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The Bank
for International Settlements (BIS) has announced the first six projects to be
undertaken by its Innovation Hub in 2024, building on the completion of 12
projects in 2023 with eight more still ongoing. The new projects will focus on
areas like cybersecurity, fighting financial crime, central bank digital
currencies, and green finance.

One project
called Project Leap will work on “quantum-proofing” payment systems
against potential future threats from quantum computers. Another one codenamed
Project Symbiosis will use artificial intelligence and big data to improve
emissions tracking in supply chains.

“After
completing 12 projects in 2023, we are looking forward to another busy year
ahead, in collaboration with central banks, international organizations, and
other partners,” said Cecilia Skingsley, the Head of the BIS Innovation
Hub.

Project
Aurum will study privacy issues in central bank digital currency design, while
Project NGFS Data Directory 2.0 aims to upgrade the data platform of the
Network for Greening the Financial System to make climate-related financial
data more easy to search.

Additionally,
Project Promissa will test using distributed ledger technology to tokenize
promissory notes, and financial instruments used to help fund international
institutions. Project Hertha plans to apply network analytics to identify
financial crime patterns in real-time payment systems.

The Full List of Projects
for 2024

  • Project
    Leap
    (Eurosystem
    Centre): Phase II will aim to “quantum-proof” payment systems by
    showing how a payment system can be protected from the potential threat of
    quantum computers.
  • Project
    Symbiosis
    (Hong
    Kong Centre): Will test using AI and big data for supply chain emissions
    disclosure and adaptation, focusing on Scope 3 emissions.
  • Project
    Aurum
    (Hong Kong
    Centre): New phase studying privacy of payments in retail CBDCs, leveraging
    expertise from academia and privacy regulators.
  • Project
    NGFS Data Directory 2.0
    (Singapore Centre): Rebuilding the data directory platform of the
    Network for Greening the Financial System to make it more usable.
  • Project
    Promissa
    : Testing
    feasibility of tokenizing paper-based promissory notes that help fund
    international financial institutions using distributed ledger technology.
  • Project
    Hertha
    (London
    Centre): Testing the use of network analytics to help identify financial crime
    patterns in payment systems.

“Tokenization
is an important area where we have already launched one project and are
planning more initiatives. Safety is another crucial area. We need to find ways
to improve the efficiency of services like payments, without ever compromising
on security, following the principle set by the G20 countries,” Skingsley added.

BIS
highlighted that its Innovation Hub has carried out almost 30 projects across
various emerging areas of technology relevant to central banking over the past
four years. However, it emphasized that the experimental nature of the projects
aims to investigate the feasibility of different applications rather than
endorse specific technologies.

FX Derivatives and Crypto
through the Eyes of BIS

In July, BIS told the Group of Twenty that cryptocurrencies cannot be adopted as a
monetary instrument due to “inherent structural flaws.” A few months
later, in October, global banking regulators, including the Bank, took a step
towards increasing transparency by introducing a Basel Committee proposal to
enforce standardized crypto asset disclosure by major banks starting in January
2025.

Growth in
complex financial instruments continued as well. In November, BIS reported
surging over-the-counter (OTC) derivatives volumes resulting from interest rate
fluctuations and the phasing out of LIBOR benchmark rates. Specifically, OTC interest
rate derivatives rose 17% and FX derivatives climbed.

Also in
November, BIS launched a new Data Portal to improve the availability and
accessibility of international banking statistics and other financial
indicators, marking a major advancement for financial data.

BIS has
clearly been active on multiple fronts in shaping policies and infrastructure
for the evolving global financial system. From critiquing cryptocurrencies to
pushing transparency reforms and monitoring complex securities, BIS
continues promoting stability and soundness.

The Bank
for International Settlements (BIS) has announced the first six projects to be
undertaken by its Innovation Hub in 2024, building on the completion of 12
projects in 2023 with eight more still ongoing. The new projects will focus on
areas like cybersecurity, fighting financial crime, central bank digital
currencies, and green finance.

One project
called Project Leap will work on “quantum-proofing” payment systems
against potential future threats from quantum computers. Another one codenamed
Project Symbiosis will use artificial intelligence and big data to improve
emissions tracking in supply chains.

“After
completing 12 projects in 2023, we are looking forward to another busy year
ahead, in collaboration with central banks, international organizations, and
other partners,” said Cecilia Skingsley, the Head of the BIS Innovation
Hub.

Project
Aurum will study privacy issues in central bank digital currency design, while
Project NGFS Data Directory 2.0 aims to upgrade the data platform of the
Network for Greening the Financial System to make climate-related financial
data more easy to search.

Additionally,
Project Promissa will test using distributed ledger technology to tokenize
promissory notes, and financial instruments used to help fund international
institutions. Project Hertha plans to apply network analytics to identify
financial crime patterns in real-time payment systems.

The Full List of Projects
for 2024

  • Project
    Leap
    (Eurosystem
    Centre): Phase II will aim to “quantum-proof” payment systems by
    showing how a payment system can be protected from the potential threat of
    quantum computers.
  • Project
    Symbiosis
    (Hong
    Kong Centre): Will test using AI and big data for supply chain emissions
    disclosure and adaptation, focusing on Scope 3 emissions.
  • Project
    Aurum
    (Hong Kong
    Centre): New phase studying privacy of payments in retail CBDCs, leveraging
    expertise from academia and privacy regulators.
  • Project
    NGFS Data Directory 2.0
    (Singapore Centre): Rebuilding the data directory platform of the
    Network for Greening the Financial System to make it more usable.
  • Project
    Promissa
    : Testing
    feasibility of tokenizing paper-based promissory notes that help fund
    international financial institutions using distributed ledger technology.
  • Project
    Hertha
    (London
    Centre): Testing the use of network analytics to help identify financial crime
    patterns in payment systems.

“Tokenization
is an important area where we have already launched one project and are
planning more initiatives. Safety is another crucial area. We need to find ways
to improve the efficiency of services like payments, without ever compromising
on security, following the principle set by the G20 countries,” Skingsley added.

BIS
highlighted that its Innovation Hub has carried out almost 30 projects across
various emerging areas of technology relevant to central banking over the past
four years. However, it emphasized that the experimental nature of the projects
aims to investigate the feasibility of different applications rather than
endorse specific technologies.

FX Derivatives and Crypto
through the Eyes of BIS

In July, BIS told the Group of Twenty that cryptocurrencies cannot be adopted as a
monetary instrument due to “inherent structural flaws.” A few months
later, in October, global banking regulators, including the Bank, took a step
towards increasing transparency by introducing a Basel Committee proposal to
enforce standardized crypto asset disclosure by major banks starting in January
2025.

Growth in
complex financial instruments continued as well. In November, BIS reported
surging over-the-counter (OTC) derivatives volumes resulting from interest rate
fluctuations and the phasing out of LIBOR benchmark rates. Specifically, OTC interest
rate derivatives rose 17% and FX derivatives climbed.

Also in
November, BIS launched a new Data Portal to improve the availability and
accessibility of international banking statistics and other financial
indicators, marking a major advancement for financial data.

BIS has
clearly been active on multiple fronts in shaping policies and infrastructure
for the evolving global financial system. From critiquing cryptocurrencies to
pushing transparency reforms and monitoring complex securities, BIS
continues promoting stability and soundness.

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