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In the SupTech Loop #16

Hi Suptech Community,  

Welcome to the 16th issue of the Cambridge SupTech Lab bi-weekly LinkedIn newsletter, a source for updates on recent innovations, breakthroughs, opportunities, upcoming events in the suptech field, and news from the Cambridge SupTech Lab team.

If you would like to flag any items for inclusion in the next newsletter, please email us at cambridgesuptechlab@jbs.cam.ac.uk. Occasionally, we also email our global community of supervisors, data scientists, vendors, and suptech experts to share event invites, news, or new courses—subscribe here.

This edition includes news from the Bank for International Settlements – BIS, Regnology, European Central Bank (ECB), Toronto Centre, International Monetary Fund, Monetary Authority of Singapore (MAS), Finextra, Regtech Africa, Network for Greening the Financial System (NGFS), and others.

Suptech Innovations

  • Nasdaq to boost market surveillance with generative artificial intelligence (GenAI). Exchange operator Nasdaq is integrating a GenAI-powered feature into its market surveillance technology. The operator says the feature will boost the quality, speed, and efficiency of market abuse investigations its clients perform, streamlining the triage and examination process involved in investigating suspected manipulation and insider dealing. Read more here.

 

Central Banking & Technology

  • United Kingdom (UK) and Singapore reaffirm sustainable finance and fintech co-operation pact. During the 9th UK-Singapore Financial Dialogue in Singapore, both countries discussed collaboration opportunities in priority areas such as sustainable finance and FinTech and innovation. They also exchanged views on recent developments in non-bank financial intermediation (NBFI) and efforts to improve cross-border payment connectivity. Read more here.
  • Australia passes Digital ID Bill. The Australian Government has passed the Digital ID Bill 2024 and Digital ID (Transitional and Consequential Provisions) Bill 2024. The legislation will establish an economy-wide Digital ID system and allow for financial organisations and providers to apply and join the Government’s Digital ID platform. The benefits of this system will be a stronger and more secure ecosystem for users online. Read more here.
  • European Central Bank (ECB) conducts first distributed ledger technology (DLT) trials for wholesale central bank money settlement. The ECB has initiated a series of trials to explore the use of DLT for settling wholesale transactions in central bank money. These trials involve actual settlement in central bank money and experiments with mock settlement in test environments. The goal is to enable DLT platforms to interact smoothly with existing Eurosystem infrastructures or introduce new forms of central bank money that can be recorded and transferred on DLT platforms. Read more here.
  • Reserve Bank of India (RBI) proposes offline capable Central Bank Digital Currency (CBDC) to enhance accessibility. India’s RBI is actively working to enhance the accessibility of its CBDC by introducing offline functionality. By prioritizing usability and reliability, the RBI aims to maximize the benefits of CBDC-Retail for users across the country, regardless of their technological environment. RBI’s governor, Shaktikanta Das, has revealed that India has conducted pilot programs involving its digital currency, with approximately 1.3 million customers and 300,000 merchants participating. Read more here.
  • Blockchain researchers use AI to spot cryptocurrency money laundering. Researchers from Elliptic, IBM Watson and MIT have explored subgraph representation learning in the context of complex networks, specifically focusing on analysing local structures (or shapes) within Bitcoin clusters. Enabled by scalable Graph Neural Networks (GNNs), this approach encodes relational information at a subgroup level rather than at the node level of abstraction. The dataset called Elliptic2 contains 122K labeled subgraphs of Bitcoin clusters linked to illicit activity. The model produced very promising results, identifying illicit activity based on on-chain patterns as well as directing the researchers towards previously unknown illicit cryptocurrency wallets. Read more here.
  • Bank of International Settlements (BIS), central banks and the Institute of International Finance (IIF) invite private financial institutions to join Project Agorá. This joint public-private initiative launched by the BIS, a group of leading central banks and the IIF, invites the private sector to join its exploration of how tokenisation can enhance the functioning of wholesale cross-border payments. The project’s main goal is to explore improving the speed and integrity of cross-border payments within the two-tiered banking system, as well as the functions of commercial bank money (deposits) and central bank money (reserves with central banks) for wholesale transactions. Interested private sector financial institutions should submit their application by 31st May 2024. Read more and apply here.
  • The systemic implications of AI will depend on the levels of technological penetration and supplier concentration, ECB paper says. As part of the Financial Stability Review, a team of researchers at the ECB explored the benefits and risks of adopting AI. On the upside, they mention that AI may increase the efficiency of financial intermediation. However, over-reliance on a limited number of AI suppliers, in the case where AI tools are widely used in the financial system, may amplify risks and threaten financial stability. Read more here.
  • A machine learning framework for anomaly detection in payment systems. This BIS working paper proposes a novel machine-learning framework for real-time transaction monitoring in high-value payment systems. The framework uses a layered approach. First, a supervised machine learning algorithm identifies and separates “typical” payments from “unusual” payments. Second, only the unusual payments are run through an unsupervised machine learning algorithm to detect anomalies. The authors test this framework using artificially manipulated transactions and payment data from the Canadian HVPS, and the first-layer machine learning algorithm achieves a detection rate of 93%. Read more here.
  • Network for Greening the Financial System (NGFS) publishes recommendations for central banks to advance their Sustainable and Responsible Investment (SRI) practices. This Report, a collaborative effort of the members of the Workstream “Net Zero for Central Banks” of the NGFS, is based on insights from earlier NGFS publications, as well as intelligence and aims to further steer action by presenting 10 non-binding recommendations that central banks can use to advance their understanding and adoption of SRI practices.
    • Recommendations 1-4 aim to help central banks to include sustainability considerations in their governance (Governance).
    • Recommendations 5-6 shed light on how the exposure to sustainability factors can be assessed (Measure).
    • Recommendations 7-8 aim to assist central banks in implementing their SRI policy (Act).
    • Recommendations 9-10 help to integrate sustainability considerations in reporting practices as well as in the evaluation process (Evaluate)

    Read more here.

  • Basel Committee on Banking Supervision (BCBS) publishes report on the digitalisation of finance. The BCBS has published a report examining the implications of the ongoing digitalisation of finance on banks and supervision. The report considers both the benefits and risks of new technologies and the emergence of new technologically enabled suppliers in the provision of banking services. It identifies eight implications for banks and supervisors regarding macro-structural elements, specific digitalisation themes, and capacity building and coordination. Read more here.

Events

  • Regtech Africa Conference 2024. This event, scheduled to convene on 23rd and 24th May 2024 in Lagos, Nigeria, will gather luminaries, policymakers and industry titans to chart a course towards unlocking the transformative potential of data governance in Africa’s economic landscape. The conference will assess the data trust gap and how governments harness partnerships for Africa’s prosperity. The agenda themes include ‘Supervisory Technology’, ‘Identity & KYC’, ‘AML & Financial Crimes’, ‘AI Regulation’, ‘Financial Inclusion’, ‘Women in Regtech’, ‘Consumer Protection’, ‘E-commerce & Cross-border Trade’ and ‘Fintech vs Traditional Banks’. Cambridge Suptech Lab’s senior suptech specialist, Juliet Ongwae, PhD, will be sharing insights on bridging the data trust gap during the suptech roundtable. Read more here.
  • Currency Research 2024 Advancement in Payment, Innovation, and Technology Awards. These awards, organised by Currency Research, a global provider of conferences for financial authorities and payment industry players, recognise exceptional contributions to advancing digital currencies, digital asset tokenisation, and the responsible use of artificial intelligence within the financial sector. Organizations and individuals demonstrating leadership, innovation, and impact in their respective fields are welcome to submit nominations by 30th June 2024. The awards ceremony will take place on 24th September 2024. Read more here.
  • NJ AI Summit spotlights an ‘extraordinary opportunity’ to lead in AI technology and its responsible development. This event occurred on Princeton’s campus on April 11, 2024. The summit convened leaders from the region and beyond to explore the rapidly evolving possibilities and challenges of artificial intelligence. They discussed AI applications in health, finance, sustainable energy and technology while also addressing the societal implications of AI and the opportunities to advance AI education and workforce development. Regarding finance, speakers delved into AI’s impact on financial strategies, featuring experts from BNY Mellon and Prudential Financial. As for the societal implications, Beth Noveck, the first Chief innovation officer of New Jersey and The Governance Lab director, addressed incorporating AI in the public sector and harnessing “AI for good”. See videos here.
  • The Point Zero Forum 2024. This event, hosted by Elevandi and the Federal Department of Finance (FDF), is scheduled to occur in Zurich, Switzerland, from 1st to 3rd July 2024. This annual forum brings together 2,000 central bankers, regulators, policymakers, industry leaders, technologists, and investors to discuss the latest developments in financial technology and the future of finance. The thematic focus for this year’s forum includes two critical elements: ‘Forming Frontier Tech: AI & Quantum Computing’ and ‘Decoding Digital Money and Payments’. Read more and register here.
  • Toronto Centre Certified Financial Supervisor (CFS) Level 1: Climate and Biodiversity Loss Risks. This virtual, cross-sectoral programme examines the adaptation of supervision to climate change and biodiversity loss-related risks, micro- and macroprudential responses to these risks, and the consequences of these risks to the financial system, consumer protection, and financial inclusion. It is a mandatory Level 1 programme for the CFS designation, and it will be a required program for the new certificate in climate risk supervision.  The programme begins on 6th June 2024. Mid-to senior-level supervisors and regulators with responsibilities in supervision of the banking, securities, insurance, or pensions sectors, or for managing financial stability and financial surveillance are invited to attend. Read more and register here.

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Authors
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Cambridge SupTech Lab

Cambridge SupTech Lab

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Jose Miguel Mestanza Hirakata

Cambridge SupTech Lab

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Juliet Ongwae

Cambridge SupTech Lab

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Kalliopi Letsiou

Cambridge SupTech Lab

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Maryeliza Brasa and Samir Kiuhan-Vasquez

Cambridge SupTech Lab

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Matt Grasser

Cambridge SupTech Lab

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Matt Grasser and Kalliopi Letsiou

Cambridge SupTech Lab

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Simone di Castri

Cambridge SupTech Lab

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