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Nasdaq Embraces AI to Spearhead Financial Crime Prevention

Nasdaq Inc. has made substantial investments in artificial intelligence (AI) technologies. As Nasdaq, which has historically been renowned as a worldwide stock exchange operator, transforms into a more diverse financial services firm, this endeavour marks a significant strategic shift for the company.

During the address that she gave at the Consumer Technology Association conference in Las Vegas, Adena Friedman, the Chief Executive Officer of Nasdaq, emphasised the company’s dedication to using artificial intelligence for the purpose of preventing financial crimes. Friedman emphasised the need of employing cutting-edge technology in order to maintain a competitive advantage in this continuous battle against sophisticated financial criminals. He acknowledged the growing necessity to combat these criminals.

The anti-financial crime section of Nasdaq, which has seen growth of roughly twenty percent year-over-year, is at the vanguard of this drive. Through the use of artificial intelligence, Nasdaq intends to improve its skills in anticipating and swiftly recognising illicit behaviour, therefore significantly enhancing the integrity of the financial ecosystem. This strategy, which is powered by artificial intelligence, is not only unique but also essential in this day and age, when financial crimes are growing more complicated and more difficult to detect.

Not only does the cooperation include collaborations with Nasdaq, but it also involves ties with other exchanges, brokerage companies, and banks. It is anticipated that these businesses would make use of the software provided by Nasdaq in order to identify and remove any risks, hence producing a more secure financial environment for all applicable parties.

Nasdaq has been undergoing a more comprehensive transition since 2017, and this investment in artificial intelligence is a component of that shift. By expanding outside its core exchange activities, the firm has diversified into more dependable income sources. One example of this is the purchase of Adenza, a software supplier that made a substantial contribution to Nasdaq’s development into a full financial services organisation.

In addition, the incorporation of artificial intelligence into the market for financial services is reflective of a larger trend in the sector, which is that businesses are increasingly resorting to technology in order to improve their operations and provide distinctive services. This pattern is especially noticeable in fields such as biotechnology, where businesses are increasing their use of artificial intelligence in order to develop novel solutions and differentiate themselves in the market.

Tether Criticizes UN Report for Overlooking USDT Traceability and Law Enforcement Collaboration

Tether, the issuer of the USDT stablecoin, has publicly disputed a recent United Nations report that highlighted the token’s alleged involvement in illicit activities, particularly in East and Southeast Asia. It states,

We are disappointed in the UN’s assessment that singles out USDT highlighting its involvement in illicit activity while ignoring its role in helping developing economies in emerging markets, completely neglected by the global financial world simply because servicing such communities would be unprofitable for them.

The UN report, titled “Casinos, Money Laundering, Underground Banking, and Transnational Organized Crime in East and Southeast Asia: A Hidden, Accelerating Threat,” specifically pointed to USDT’s popularity on illegal online gambling platforms and its role in regional cyber fraud operations, due to its stability and low transaction fees.

In a robust defense, Tether criticized the UN’s analysis for ignoring the traceability of USDT tokens and its history of collaboration with law enforcement globally. The firm argued that the UN report neglected the positive impact of USDT on developing economies in emerging markets, areas often overlooked by the global financial world due to unprofitability. Tether emphasized its commitment to collaboration on anti-financial crime efforts, highlighting the recent freezing of over $300 million in USDT involved in illicit activities, including $225 million in November 2023 linked to a Southeast Asian human trafficking syndicate.

Tether’s CEO Paolo Ardoino responded to the UN’s assessment, stating that the report failed to acknowledge the positive impact of USDT on developing economies in emerging markets. Ardoino emphasized Tether’s collaboration with law enforcement agencies and other stakeholders, including the UN. Despite the allegations, Tether asserted that USDT transactions are traceable on the blockchain, making it an impractical choice for illicit activities. The company aims to dispel concerns about the anonymity of USDT transactions by highlighting the transparency and accountability enabled by blockchain technology.

The stablecoin issuer further emphasized its dedication to community protection by implementing security measures, including its collaboration with Chainalysis to develop tools for monitoring secondary markets. Tether urged the UN to acknowledge these industry-leading security measures and its track record of collaboration with law enforcement.

As the UN report gained attention, concerns were raised about the potential impact on Tether’s reputation and the broader cryptocurrency market. Investors and industry participants closely monitor such developments, as regulatory scrutiny continues to increase in the crypto space. Tether’s response reflects a broader industry trend where cryptocurrency companies are actively engaging with regulators and law enforcement agencies to address concerns related to illicit activities.

In conclusion, Tether remains steadfast in its commitment to addressing the allegations raised by the UN report. The company’s response emphasizes the importance of considering the positive contributions of USDT to emerging markets and the traceability of transactions on the blockchain. As the cryptocurrency industry navigates increasing regulatory challenges, Tether’s proactive approach towards collaboration and transparency may set a precedent for responsible and accountable practices within the sector.

EBA Issues Updated Guidelines for Crypto Asset Service Providers

The European Banking Authority (EBA) has made significant strides in the regulation of crypto asset service providers (CASPs), issuing updated guidelines aimed at mitigating risks associated with money laundering and terrorist financing. This move, announced on January 16, 2024, is part of a broader effort to harmonize regulatory approaches across the European Union and integrate crypto companies into the existing financial regulatory framework.

The amended guidelines extend the European Union’s Anti-Money Laundering and Counter-Terrorist Financing measures to encompass all European crypto companies. CASPs, including exchanges, wallets, and custodians, are now required to comply with stringent anti-money laundering (AML) and know-your-customer (KYC) financial regulations. The EBA’s primary aim is to standardize crypto regulations to prevent these platforms from being used for illicit activities.

With the rapid growth of the crypto industry, the EBA recognizes the increased risks due to the nature of crypto transactions. These risks are amplified by the speed of crypto asset transfers and features that can obscure users’ identities. To address these risks, CASPs are advised to utilize tools like blockchain analytics and consider risks related to anonymity-enhancing features, self-hosted wallets, and decentralized platforms. The guidelines include detailed risk assessment directives for CASPs, particularly focusing on the potential dangers associated with various products and services that facilitate transfers between companies and users.

This comprehensive approach by the EBA aligns with the European Union’s recent regulatory developments in the crypto sector, such as the Transfer of Funds Regulation (ToFR) and the Markets in Crypto Assets (MiCA) legislation. The enforcement of these guidelines is scheduled to coincide with the launch of MiCA, set for December 30, 2024. MiCA introduces specific investor protections for crypto users and offers an 18-month transitional period for CASPs to adapt to these new regulations.

Moreover, the guidelines extend beyond CASPs, affecting legacy financial institutions that interact with crypto services or customers. This reflects the EBA’s recognition of the interconnectedness within the financial system. Financial firms and credit facilities dealing with digital asset service providers or customers exposed to virtual assets are also subject to the new guidelines.

In summary, the EBA’s updated guidelines represent a crucial step towards a more secure and regulated crypto environment within the European Union. By harmonizing AML measures and extending their reach to include crypto firms, the EBA aims to mitigate the risks of financial crimes and integrate crypto assets more securely into the financial system.

BIS Advances Technology in Finance: Quantum, AI, and Green Initiatives for 2024

The Bank for International Settlements (BIS) has announced a suite of six pioneering projects for 2024, signaling a significant leap in the integration of emerging financial technologies such as quantum security, artificial intelligence, and green finance. This move demonstrates BIS’s dedication to enhancing the resilience and efficiency of the global financial system in an increasingly digital and environmentally-conscious era.

The six projects, as outlined by the BIS Innovation Hub, are as follows:

Project Leap (Eurosystem Centre): Focused on “quantum-proofing” payment systems, this initiative seeks to protect financial infrastructures against the potential threats posed by quantum computing advancements. The Eurosystem Centre leads this endeavor, highlighting the importance of future-proofing payment systems in the digital age.
Project Symbiosis (Hong Kong Centre): Leveraging artificial intelligence and big data, this project aims to revolutionize emissions tracking in supply chains, particularly focusing on Scope 3 emissions. The initiative underscores the critical role of technology in tackling climate change and promoting sustainable business practices.
Project Aurum (Hong Kong Centre): This project delves into the privacy aspects of retail central bank digital currencies (CBDCs). Collaborating with academic and privacy experts, it reflects the BIS’s commitment to balancing innovation in digital currencies with the need for user privacy.
Project NGFS Data Directory 2.0 (Singapore Centre): Aimed at enhancing the accessibility and usability of climate-related financial data, this project supports the Network for Greening the Financial System (NGFS). It addresses the growing importance of climate risk in financial decision-making.
Project Promissa: Exploring the use of distributed ledger technology, this project tests the tokenization of promissory notes, a critical component in funding international financial institutions. It highlights the potential of blockchain technology in improving the efficiency and security of financial transactions.
Project Hertha (London Centre): This initiative applies network analytics to identify patterns of financial crime in real-time payment systems, showcasing BIS’s dedication to combating financial crime and enhancing the integrity of the financial ecosystem.

Cecilia Skingsley, Head of the BIS Innovation Hub, emphasized the importance of these projects, stating that they reflect a commitment to safety and efficiency in financial services, in line with the principles set by G20 countries. The projects build on the completion of 12 initiatives in 2023, with eight more ongoing, showcasing BIS’s proactive approach in addressing the challenges of the modern financial landscape.

These projects also align with BIS’s broader efforts in critiquing cryptocurrencies, advocating for transparency reforms, and monitoring complex securities, further cementing its role in promoting stability and soundness in the global financial system.

As the financial world grapples with the implications of digital transformation and environmental challenges, the BIS’s 2024 agenda stands as a testament to its role as a leader in shaping policies and infrastructure for a sustainable and secure financial future.