Tag: banking

Innovation & Business Press & Publications Society & Diplomacy

Charting Uncharted Waters: Europe’s Place in a World Remade

Jochen Werne November 4, 2023

By Jochen Werne.

Duesseldorf, 5 November 2023

Introduction

From the eloquent words of Shakespeare in Henry V, where he once proclaimed, “all things are ready if our minds be so”^1 to the monumental shifts brought by Gutenberg’s printing press^2, history reminds us that change is both an inevitable and defining characteristic of human progress. As the world stands at the threshold of a new epoch marked by rapid technological shifts and pronounced geopolitical transformations, this profound sentiment compels us to reflect on the paramount importance of preparedness and perspective. The way societies respond to these shifts determines the direction of their trajectory. In our current age, Europe finds itself at the nexus of global transformations driven by technological advancements and geopolitical tectonics.

Technology: A Historical Reflection

Peering through the lens of history, one quickly realizes that technology has been both a beacon of hope and an augury of upheaval. Take the 15th century’s monumental invention of the printing press as a case in point^2. This groundbreaking innovation democratized access to information and catalysed a substantial uptick in literacy rates across Europe. As Eisenstein posits, the “Printing Revolution” catalyzed an era where knowledge was no longer the privilege of the few but a right of the many^2. Yet, its reverberations were not confined to just reading and writing. The press became the vessel through which Martin Luther disseminated his Ninety-Five Theses, triggering a religious revolution that reshaped the European continent.

However, the journey wasn’t without turbulence. This democratization of knowledge played a pivotal role in challenging the established order, culminating in events like the Reformation, which MacCulloch describes as Europe’s great house divided^3.

Niall Ferguson, in “The Square and the Tower”, beautifully illustrates the timeless tension and interplay between networks and hierarchies^4. Historically, technologies like the printing press have emerged as disruptors, challenging established orders and reshaping hierarchies. The press, for instance, allowed for the free flow of ideas, becoming an early network that democratized information. Yet, not everything it propagated was for the betterment of society. The infamous “Malleus Maleficarum”, an ostensibly scholarly treatise, fueled the flames of the European witch hunts, leading to persecution, paranoia, and a dark chapter in history^5.

From Past to Present: The Tech Geopolitical Nexus

Fast forward to the present, and we witness a world where technology continues to shape geopolitical realities. Maddison’s macro-economic study reveals that the global center of economic gravity has been steadily shifting towards the East, particularly since the dawn of the 21st century^6. Nowhere is this shift more apparent than in the realm of technology.

The US-China tech rivalry, explored by Fuller, highlights the strategic challenges posed by China’s technological ascent^7.

The race for supremacy in AI, quantum computing, 5G, and biotechnologies marks the modern-day power play. But this isn’t merely about technological one-upmanship; it signifies a larger canvas of geopolitics, economics, and even societal values.

Many analysts are drawing parallels to the Cold War, coining the term “Tech Cold War” or “Cold War II”. Unlike the 20th-century version, primarily characterized by nuclear deterrence between the USSR and the US, this new Cold War positions the US and China in an intense rivalry for technological, economic, and military dominance. In the midst of this rivalry, both nations are hyper-aware of the stakes.

Navigating the Waters of New Geopolitical Paradigms

More than a century ago, the naval strategist Alfred Thayer Mahan, in his seminal work on sea power, postulated that maritime dominance was crucial to national greatness.

Today the Indo-Pacific has become the focal point of 21st-century geopolitics. Here, China’s assertive ‘Two Ocean Strategy’ is emblematic of its ambitions to exert influence both in the Pacific and the Indian Ocean. This expansive maritime vision is not just about sea lanes and trade; it’s a reflection of China’s aspirations to be a global power.

Simultaneously, the Taiwan question looms large in this maritime strategy. Its strategic location in the first island chain poses both an opportunity and a challenge for Beijing. Control over Taiwan would offer unencumbered access to the broader Pacific.

However, the rise of one power often brings countermeasures by others. The ‘AUKUS’ agreement between Australia, the United Kingdom, and the United States is a manifestation of this dynamic. While cloaked in the language of technological collaboration, especially in the realm of nuclear-powered submarines, the underlying intent of AUKUS is clear. It seeks to counterbalance China’s growing naval capabilities and assertiveness, particularly in the South China Sea.

Reflecting on Mahan’s sea power doctrine in this context provides a sobering perspective. Mahan believed that maritime dominance was the linchpin of global influence. Yet, he also understood the responsibilities and challenges that came with such power. In our contemporary setting, while nations pursue their maritime strategies, it is imperative they also embrace the principles of dialogue, cooperation, and conflict avoidance.

Taiwan epitomizes this interplay. As a beacon in semiconductor manufacturing, Taiwan’s geopolitical relevance can’t be overstated. Any instability could trigger economic consequences potentially dwarfing the aftermath of the Covid-19 pandemic^9.

Taiwan and Europe: Quietly Interwoven, Profoundly Connected.

In the intricate web of global technology supply chains, few names stand out as prominently as Taiwan Semiconductor Manufacturing Company (TSMC). Founded in 1987, TSMC has ascended the technological hierarchy to become the world’s leading semiconductor foundry, a testament to its unwavering commitment to innovation and excellence.

TSMC’s significance is multifaceted. For one, it’s the world’s largest dedicated independent semiconductor foundry^8. With clients ranging from major tech giants like Apple and Nvidia to burgeoning startups, TSMC’s production underpins a vast swathe of the digital products and solutions we rely on daily. However, TSMC’s role isn’t merely a commercial or technological one. It is geopolitical. With the escalating “Tech Cold War” between the U.S. and China, TSMC finds itself at an intriguing junction. The company’s strategic importance is underscored by global reliance on its cutting-edge chip manufacturing capabilities. This reliance has not only made TSMC a coveted partner but also a strategic asset in the larger scheme of global geopolitics. The U.S. push to ensure TSMC sets up manufacturing bases on its soil, and China’s keen interest in the semiconductor sector, highlights the foundry’s pivotal position.

Furthermore, TSMC embodies Taiwan’s broader significance in the tech world. As the geopolitical tussle intensifies, Taiwan – and by extension, TSMC – becomes a linchpin for global tech supply chains. A disturbance in TSMC’s operations, as speculated, could have cascading ramifications across industries, from consumer electronics to automotive and healthcare. Any significant disruption in this intricate supply chain would reverberate globally, with experts suggesting a potential 5% drop in global automotive production^9.

As chips become smaller, denser, and more powerful, the precision and capability of lithography machines must evolve in tandem.

Here’s where Europe and ASML, a Dutch gem, comes into play. The company is the sole producer of extreme ultraviolet (EUV) lithography machines^8, an advanced technology that allows for the creation of incredibly dense and efficient chips. With transistors now approaching atomic scales, EUV lithography is no less than a technological marvel, allowing chipmakers to etch circuits just a few nanometers wide.

However, the conversation around ASML isn’t merely about technological mastery. Given its unique position as the only producer of these EUV machines, ASML enjoys a quasi-monopolistic status in this niche yet profoundly impactful domain. In an era where technological supremacy is increasingly intertwined with geopolitical power, also ASML’s importance cannot be overstated. The machines they produce are not just expensive and sophisticated pieces of equipment; they are, in many ways, gatekeepers to the next generation of digital innovation.

Such a near-monopoly naturally draws attention. Nations and corporations are keenly aware of the strategic value inherent in controlling or accessing state-of-the-art chipmaking technology. With the ongoing technological cold war, where semiconductor supply chains have become part of the geopolitical chessboard, ASML finds itself in a spotlight it never sought but cannot avoid.

Europe’s Crucial Pivot

Europe’s position in this evolving tech landscape is unique. While traditionally viewing the Atlantic alliance as a cornerstone of its foreign policy, the rise of China necessitates a recalibrated approach^10. Europe’s interlinked trade with China, especially through critical chokepoints like the Malacca Strait, underscores the strategic dimension of this relationship^11.

In this whirlwind of technological and geopolitical flux, Europe is not an idle spectator. With a collective GDP nearing $22 trillion, it wields considerable influence. Europe’s role is multi-dimensional: an economic powerhouse, a voice of reason in tumultuous times, and often a mediator in global disputes.

The European Central Bank (ECB) embodies Europe’s proactive stance^12. Recognizing the flux, the ECB’s vision for 2023-2025 zeroes in on three pillars:

The ECB recognizes that the financial institutions it oversees must adapt to these transformative times. A crucial element of this adaptation is embracing digitalization, with a special emphasis on robust data-driven risk management.

  1. Strengthening Resilience: The intricate web of global economies translates to shared vulnerabilities. It’s imperative for Europe’s financial edifice to be robust, equipped to handle external shocks, and maintain systemic stability.
  2. Digitalisation & Institutional Strengthening: The burgeoning fintech sector necessitates a complete metamorphosis for legacy banks. This isn’t a mere cosmetic digital overhaul. Banks need to internalize and deploy intelligent digitalization. Central to this transformation is data analytics, supercharged by AI. Harnessing data, drawing meaningful insights, and predicting trends will determine who thrives in this new era.
  3. Climate Change Initiatives: Europe has consistently championed sustainability. The financial sector’s alignment with green, sustainable practices isn’t just altruistic; it’s also economic prudence, ensuring long-term viability and stability.

The above mentioned ECB focus is highlighted by Experian’s 2023 report on why AI-driven, regulatory-compliant analytics solutions are becoming imperative for European banks^13.

The AI Paradigm: Europe’s value-based Ethical Approach

Europe’s approach to AI regulation, championing the cause of ‘explainable AI’, shows its commitment to integrating technology with ethics. This dedication harks back to its legacy of literacy and the importance of accessibility, a theme explored by Graff^14. As Europe navigates the ‘Asian Century’^15, it does so with a clear vision: to leverage its historical experiences and chart a course that balances innovation with ethical considerations. The European AI Act encapsulates this approach. The Act’s core philosophy revolves around ensuring AI applications are safe and respect existing laws and values. This includes transparency obligations, strict criteria for ‘high risk’ AI applications, and a provision for setting up a European Artificial Intelligence Board.

One might wonder, why the emphasis on explainability? As AI systems permeate critical sectors, from healthcare to finance, their decisions can profoundly impact individuals. An ‘explainable AI’ ensures that these decisions are not just accurate but also comprehensible to the average person. This empowers individuals, fostering trust in AI systems.

The Act, however, isn’t just about explainability. It recognizes the diverse applications of AI and categorizes them based on risk. For ‘high-risk’ applications, stringent requirements, from transparency to accuracy and security, are mandated. This stratified approach ensures that while innovation isn’t stifled, critical areas receive the scrutiny they warrant.

Economic Powerhouses: A Comparative Analysis

Any discussion on global transformation would be incomplete without examining the economic engines driving these changes. China’s astounding growth, with a GDP of $17.7 trillion by 2022^16, and its decade-long average annual growth rate of 6.5%, contrasts with the US’s $25.3 trillion GDP and a more conservative 2.3% growth rate^17. The European Union, showcasing resilience and integration, clocks a collective GDP nearing $22 trillion^18, with trade figures underscoring its global economic clout^19.

Conclusion: Europe’s Way Forward

Our world is in a state of flux, reminiscent of those transformative moments in history. From the monumental shifts of the Printing Revolution^2 to the divisive yet transformative Reformation^3, Europe has witnessed and shaped global trajectories. As it stands at the crossroads of another transformation, it draws from its rich historical tapestry, aiming to strike a balance between embracing the future and preserving its core values.

The digital future beckons, but it’s not without its challenges. Whether it’s the complex web of tech geopolitics or the imperative of sustainable growth, Europe’s journey forward will need to be both adaptive and principled. At the heart of this journey lies the potent combination of data and ethics. And as Europe strides into the future, it carries with it a clear message: progress, when rooted in ethics and driven by knowledge, can usher in an era that’s not just technologically advanced but also just, balanced, and peaceful.

Footnotes:

^1 Shakespeare, William. “Henry V.” Act IV, Scene 3. ^2 Eisenstein, Elizabeth L. “The Printing Revolution in Early Modern Europe.” Cambridge University Press, 1983. ^3 MacCulloch, Diarmaid. “Reformation: Europe’s House Divided 1490-1700.” Penguin UK, 2004. ^4 Ferguson, Niall. “The Square and the Tower: Networks and Power, from the Freemasons to Facebook.” Penguin, 2018. ^5 Kramer, Heinrich and Sprenger, James. “Malleus Maleficarum.” Dover Publications, 1971. ^6 Maddison, Angus. “Contours of the World Economy 1-2030 AD: Essays in Macro-Economic History.” Oxford University Press, 2007. ^7 Fuller, Douglas B. “Cutting off our nose to spite our face: US policy toward Huawei and Taiwan in the shadow of the Chinese tech challenge.” International Security 45.3 (2021): 52-89. ^8 Chappell, Bill. “ASML: The Obscure Dutch Company That’s Enabling Big Advances In Tech.” NPR, 2019. ^9 “The Economic Impact of a Taiwan Crisis.” Nikkei Asia, 2023. ^10 Casarini, Nicola. “The Rise of China and the Future of the Atlantic Alliance.” Oxford University Press, 2020. ^11 Lanteigne, Marc. “China’s Maritime Security and the ‘Malacca Dilemma’.” Asian Security 4.2 (2008): 143-161. ^12 “European Central Bank Annual Report.” 2023. ^13 Experian PLC. “Annual Report and Financial Statements.” 2023. ^14 Graff, Harvey J. “The Legacies of Literacy: Continuities and Contradictions in Western Culture and Society.” Indiana University Press, 1987. ^15 Khanna, Parag. “The Future is Asian: Commerce, Conflict, and Culture in the 21st Century.” Simon and Schuster, 2019. ^16 “World Bank Data: China.” 2022. ^17 “World Bank Data: United States.” 2022. ^18 “World Bank Data: European Union.” 2022. ^19 “European Commission Trade Statistics.” 2022.

About the author

Jochen Werne is CEO of Experian DACH. Large-scale global data powerhouses like Experian with it’s more than 20.000 data and analytics experts and a market cap of nearly €30bn have a pivotal role to play in this evolving narrative. As a global vanguard in data analytics, Experian is uniquely poised to offer financial institutions the insights and tools essential for navigating the multifaceted challenges of our times. In a world inundated with data, discerning patterns, understanding trends, and anticipating potential pitfalls will be the linchpin of success.

Innovation & Business Jochen Werne Press & Publications Society & Diplomacy

Decisions

Jochen Werne August 27, 2023

There’s a peculiar phenomenon that often goes unnoticed: we vividly remember the moments in our lives when we made pivotal decisions, but the lazy Sundays we spent lounging on the couch tend to blur into obscurity. Why is that? From the standpoint of psychology and neuroscience, active decision-making engages multiple brain regions, specifically the frontal cortex. This engagement imprints these moments deeply in our memory.

Decisions are the very essence of our existence. On a daily basis, we make around 35,000 decisions, from what to wear to how to react in crucial life situations. In the realms of politics and business, decisions are made amidst uncertainty. The quality and timeliness of these decisions often determine success or failure. The better we are at decision-making, the more successful we become.

However, decisions aren’t made in a vacuum. They are greatly influenced by our emotions, past experiences, and even biases. Let’s delve into game theory, a study that examines mathematical models of strategic interaction. This theory was so revolutionary that scientists like John Nash were awarded the Nobel Prize for their contributions. It showcases the intricacies of making decisions when multiple players are involved, each trying to maximize their own benefits. For instance, the “Prisoner’s Dilemma” is a classic example. It illustrates how two individuals, aiming to minimize their punishments, often don’t cooperate, even if it’s in their best interest. Their decision, influenced by a lack of trust and the inability to communicate, usually leads to a suboptimal outcome for both.

Another interesting lens through which to view decision-making is behavioural finance. This field has shown that people don’t always act rationally, and their decisions are swayed by psychological factors. The Dot-com Bubble of the late 1990s offers a poignant example. During this period, a frenzy around internet-based businesses led to skyrocketing stock prices, despite many of these companies having no solid profits or clear business plans. Overconfidence and herd behavior drove investors to pour money into these stocks, leading to massively inflated valuations. The bubble inevitably burst in the early 2000s, resulting in significant financial losses for countless investors. This incident underscores the dangers of letting emotions and biases overrule rational financial decision-making.

Given the complexities, decision-makers often seek a solid foundation for their choices. This is where data comes into play. But data is not just essential; it’s omnipresent. It’s estimated that 2.5 quintillion bytes of data are created every day. Like water, it’s everywhere. And just as water can flood a village if not channeled properly, unstructured data can overwhelm and mislead.

Take the banking sector, for instance. Banks use data to assess creditworthiness. In e-commerce, data-driven algorithms suggest products to consumers. Telecom industries utilize data to enhance customer experience and predict churn. The cornerstone of these industries is state-of-the-art data analytics capabilities paired with robust decision engines.

However, with the influx of data, it’s crucial to discern the essential from the redundant. Much like converting saltwater to drinking water requires precision and expertise, sifting through raw data to extract meaningful insights is the forte of data analysts. They refine data into actionable decision-making parameters, reducing uncertainty. And in business, reduced uncertainty translates to reduced risk and increased profitability.

To conclude, data is indeed akin to water. Left unchecked or misused, it can wreak havoc. But when used right, when structured, analyzed, and enriched, it becomes invaluable. This is the essence of using “Data for Good” – transforming the ubiquitous into the indispensable, guiding decision-makers toward better, more informed choices.

Innovation & Business Press & Publications

Journal of Digital Banking: Same Game – Same Rules?

Jochen Werne March 29, 2023

It was a pleasure contributing once again to a Henry Stewart Publication. This time in co-authorship (Christoph Impekoven & Jochen Werne) we delineate for the Journal of Digital Banking the differences between stablecoins, in particular, and ‘fiat’ currencies, in general. When you have read this paper, you will know what a stablecoin is, what types there are, how it differs from the US dollar or the euro and why the most important currency in all worlds is ‘trust’.

The Journal can be bought online HERE

Journal of Digital Banking

Journal of Digital Banking is the major professional journal publishing in-depth, peer-reviewed articles and case studies on FinTech innovation, digital disruption and how to develop a profitable, customer-focused digital banking strategy – specifically by using technology and automation to deliver efficient, secure and seamless customer experiences with lower operating costs.

Each quarterly 100-page issue – published in print and online – will feature detailed, practical articles showcasing the latest strategic thinking on how to exploit new and existing digital banking markets, business models and FinTech innovations along with actionable advice and ‘lessons learned’ from fellow digital banking professionals on the key business, risk and operational requirements for putting that strategy into practice. It will not publish advertising but rather in-depth analysis of new thinking and practice at a wide range of financial institutions, FinTech innovators and start-ups, investors, central banks and financial regulators worldwide for readers to benchmark their organisation against, with every article being peer-reviewed by an expert Editorial Board to ensure that it focuses on the digital banking professional’s perspective, the challenges they face and how they can tackle them.

Journal of Digital Banking is listed in Cabells’ Directories of Publishing Opportunities.  

Journal of Digital Banking is abstracted and indexed in the Research Papers in Economics (RePEc) database IDEAS

As such Journal of Digital Banking publishes articles on:

  • Innovative digital payment services
  • FinTech innovation
  • Digital payments product management
  • AI and machine learning
  • Mobile banking and apps
  • Blockchain
  • Open banking
  • Customer service, personalisation and user experience
  • Digitisation initiatives and replacing legacy systems
  • Investing in digital banking start-ups
  • Big Data and analytics
  • Risk, fraud and security
  • Regulation and compliance
  • Barriers to consumer adoption and how to overcome them
  • Standardisation initiatives
  • Digital, alternative and cryptocurrencies
  • Business models and partnerships
  • Digital banking operations and services

Rather than publishing advertising or the ‘bite-sized’ articles all too common on the internet, Journal of Digital Banking provides in-depth guidance and analysis on the key issues facing financial services in today’s rapidly evolving digital world, with high-quality articles from leading banks and other financial institutions, FinTech innovators and startups, central banks, financial regulators, investors, consultants and service providers, plus researchers and educators in the field.

Essential reading for Departmental Heads, Directors, Managing Directors, VPs, SVPs, EVPs and Senior Managers of:

  • Digital strategy
  • Digital banking
  • Mobile payments
  • Online banking
  • Payments innovations
  • Marketing
  • Customer insights and analytics
  • User experience
  • Payments
  • Social media
  • Payments strategy
  • Product management/strategy
  • Transaction banking
  • Payments operations and services
  • Payment systems; as well as
  • Presidents, CEOs, CTOs, CFOs, COOs and CIOs
Innovation & Business Press & Publications

New publication: The world’s most important currency 

Jochen Werne March 19, 2023

It was a great pleasure for me to contribute to Roland Eller’s, Markus Heinrich’s and Maik Schober’s latest, much acclaimed publication ”Investing money like the pros”.

As co-authors, Christoph Impekoven and Jochen Werne reflected on the topic ”The world’s most important currency”.

DO THE SAME RULES APPLY TO CENTRAL BANK AND CRYPTOCURRENCIES WHEN IT COMES TO MONETARY STABILITY? AND HOW DOES AN INVESTOR RECOGNISE THE SAFE HAVEN IN THE CRYPTO WORLD?

FIND OUT MORE IN THE NEW BOOK

The financial market offers numerous opportunities to achieve returns with manageable risk. For anyone who wants to take advantage of these opportunities and make long-term provisions, Geldanlage wie die Profis (Investing like the Pros) offers the knowledge and proven strategies of more than 25 renowned authors, which can be easily transferred to private investment.

On the one hand, the most important topics for beginners are covered: How do you find the right risk class for you? How beginner-friendly are shares, funds and ETFs? What tax issues need to be considered? On the other hand, the current megatrends are explained – alternative energies, cryptocurrencies and the real estate boom – where are high profits to be made, where does risk predominate? An indispensable guide for anyone who wants to make more out of their savings in the long term.

The book can be bought on Amazon – just click here

Innovation & Business Press & Publications

Hot off the press: What makes a stablecoin

Jochen Werne January 18, 2023

Author: Angelika Breinich-Schilly

Published on 11 January 2023 at Springer Professional – Follow this LINK to original text in German. Translation created with deepL.com

Experts quoted in the article: Stefan Behringer, Leef H. Dierks, Florian Follert, Jochen Werne, Dr. Johannes Winter, Joachim Wurmeling

What distinguishes so-called stablecoins from cryptocurrencies like Bitcoin, Ether & Co? By linking to one or more currencies, this form of digital money forms a bridge to classic FIAT currencies. How this works and where problems lurk is shown in our “Compact explained”.

Stablecoins are digital tokens, assets of private issuers that can also take on money functions. According to Leef H. Dierks, they usually replicate the value of a reserve currency, such as the US dollar, or even a whole bundle of official currencies.

Thus, they do not have to represent a claim on the issuer (the reserve currency) itself, but can also be backed by demand deposits of various currencies, securities or other assets. This so-called peg reduces the volatility of stablecoins compared to classic virtual currencies, such as Bitcoin,” writes the Springer author in the book chapter “Virtual Currencies and Monetary Policy” on page 234.

According to Dierks, stablecoins take on a bridging function to fiat currencies, “especially since, as long as they are backed by legal tender, they do not challenge the currency monopoly of central banks (analogous to bank deposits) at any time”.

Stablecoins make new business models possible

According to a thesis paper by the Landesbank Baden-Württemberg (LBBW) from mid-December 2022, stablecoins do open up new business models. At the same time, however, they are “anything but stable, but are subject to the risk of the holders fleeing from them if there are doubts about their collateralisation”. Digital money may have a negative impact on macroeconomic lending and reduce the influence of central banks on the aggregate money supply. One way to regulate it is to require issuers to hold central bank reserves.

The best-known stablecoin project is Tether, which is pegged one-to-one to the US dollar. “There has been repeated criticism of Tether, so that the company behind the issue has since admitted to using not only currency holdings in US dollars to collateralise the issued units of cryptocurrencies, but also other assets (for example, commercial papers of companies),” Stefan Behringer and Florian Follert describe the background in the book chapter “Controlling of cryptocurrencies” (page 187). This also explains why this stablecoin does not correlate exactly with the performance of the US dollar.

Risks of stablecoins

Jochen Werne and Johannes Winter explain in the book chapter “Cash, book money, cryptocurrencies and the digital euro” on page 84 that there are risks for the financial sector if stablecoins become widespread. They could undermine the banks’ deposit business and their business models. The Springer authors see in the central bank cash-backed stablecoins a possibility of a trustworthy transitional solution in hybrid form. This is a stablecoin that demonstrably holds any digital twin in the form of central bank money.

“Due to the tradability of the tokens, the flexibility of book money is paired with the guarantee of physical central bank money. Even the expected damage from a successful attack on the underlying blockchain could thus be minimised, since an unlawful acquisition of power of disposal over assets is quickly restricted in its usability. A regulated expert function guarantees that only central bank money or a digital twin is traded and thus the central supervisory function always lies with the central bank,” say Werne and Winter.

MiCA forms future legal framework

With the Markets in Crypto Assets (MiCA) regulation, the European Union has sewn a legal garment for the crypto industry in the 26 EU states. The new EU regulation is to enter into force by the beginning of 2023 and become effective 18 months later vis-à-vis all market participants.

“MiCA responds to the growth of the cryptoasset ecosystem and integrates a large number of new players into the European supervisory space,” explains Joachim Wurmeling, member of the Executive Board of the Deutsche Bundesbank, in a guest article on the occasion of the Bundesbank Symposium in November 2022. “In future, crypto service providers and issuers of crypto assets will not only have to ensure that the risks arising from the cryptoasset business are adequately managed; they will also have to apply for authorisation to issue crypto assets or to provide crypto services and be subject to ongoing supervision.”

In addition, he said, the regulation also applies to traditional financial institutions that provide services around cryptoassets. The regulatory approach for MiCA is new and is emerging alongside the traditional structure.

Innovation & Business

Hybrid Seminar: Banking Use Cases of Blockchain Technology

Jochen Werne January 8, 2023

The participants of the seminar acquire knowledge that enables them as decision-makers to understand projects that are to use blockchain technology more quickly, to recognise opportunities and risks and to evaluate them together with experts.

It is a pleasure for me, as Managing Director of Prosegur Crypto GmbH, to support the seminar together with other leading blockchain experts such as Christoph Impekoven (micobo), Markus Honvehlmann (micobo), Dr. Marc Henniges (d-fine), Dr. Timo Bernau (GSK), Lucas Zaehringer (verity) and Cara Reuner (Ecota) to train banking experts to create future innovative use cases. We will discuss:

Digital Money

  • Central Bank Digital Money – Stable Coins
  • Programmable Money
  • E-Money Tokens

For more details please refer to the website of BZ-Live: https://www.bzlive.de/veranstaltung/1606//

Innovation & Business Jochen Werne Press & Publications Society & Diplomacy

Technological Breakthroughs: A Beacon of Hope for the Future

Jochen Werne December 18, 2022

After a challenging 2022 this year ends with HOPE due to a rally of technological innovation breakthroughs. Technological progress has the potential to help address many of the challenges facing the world today, including the energy crisis, the need for better education, and financial inclusion. Three of them shall be brought to your attention: 1. CLEAN ENERGY – Breakthrough in nuclear fusion technology; 2. EDUCATION – ChatGPT is changing the way to experience artificial intelligence; 3. PRIVACY & FINANCIAL INCLUSION – New compliant pathways for privacy and security in the blockchain-based financial ecosystem

Breakthrough in nuclear fusion technology

One area where technology is helping to address the energy crisis is through the development of nuclear fusion as a potential source of clean, abundant energy. Nuclear fusion is a process in which atomic nuclei combine to release energy, and it has the potential to provide a virtually limitless source of energy with low carbon emissions. While significant progress has been made in developing fusion technology, it is still in the early stages of development and has not yet been fully commercialized. However, the potential for nuclear fusion to help address the energy crisis makes it a promising area of research and development.

In December 2022 the National Ignition Facility (NIF) has successfully sparked a fusion reaction that released more energy than went into it. Even though there’s still a long way to go toward fusion as a clean energy source, this step can be considered as a major step forward.

READ MORE ABOUT THIS BREAKTHROUGH IN THIS FUSION TECHNOLOGY MARATHON

ChatGPT changes the way you experience artificial intelligence

ChatGPT, also known as OpenAI’s GPT-3 Chatbot API, is a natural language processing (NLP) tool developed by OpenAI. It is based on the GPT-3 model, which is a large, advanced AI language model that is capable of generating human-like text.

Overall, ChatGPT is changing the way we experience and interact with AI by making it easier to build and deploy chatbot applications that can understand and respond to user input in a natural, human-like way.

ChatGPT can be used to build chatbots and other NLP applications that can understand and respond to user input in a natural, human-like way. It is designed to be easy to use and integrate into existing systems, allowing developers to quickly build and deploy chatbot applications without the need for extensive training data.

One advantage of ChatGPT is its ability to understand and respond to a wide range of inputs and topics. It is trained on a large dataset of text and has the ability to generate coherent and contextually appropriate responses to a variety of inputs. This can make it a useful tool for building chatbots and other NLP applications that need to handle a wide range of queries and topics.

(Text has been created by ChatGPT)

CHALLENGE ChatGPT YOURSELF AND BE AMAZED. FIND OUT MORE HERE

New compliant pathways for privacy and security in the blockchain-based financial ecosystem

Innovation in blockchain privacy can bring a number of advantages to the financial ecosystem, particularly in terms of increasing the security and confidentiality of transactions. By combining this innovation with a 100% collateralized stablecoin, it is possible to create a more secure and stable digital currency that can be used for a wide range of financial transactions.

One advantage of using a 100% collateralized coin is that it is pegged to a specific asset, such as a fiat currency or commodity, which helps to stabilize its value and reduce price volatility. This can make it more attractive to users, as it reduces the risk of loss due to price fluctuations. The German Digital Cash GmbH just announced to have issued the first 100% compliant, central-bank-money-backed, Made in Germany, Euro-coin on UniSwap, called Digital Cash Euro (DCEUR). READ MORE ON THE DCEUR HERE

In terms of privacy, a blockchain-based stablecoin that incorporates innovative privacy features can help to protect the confidentiality of transactions by making it more difficult for outsiders to track and monitor them. This can be particularly useful for financial institutions and individuals.

Researchers from German crypto blockchain-based payments fintech etonec and other organizations have proposed using zero-knowledge proofs to ensure regulatory compliance and privacy in stablecoins. They have created a design that allows fiat-based stablecoins to be used like cash, within limits.

Dr. Jonas Gross, states on December 15, 2022 to CoinTelegraph: “How can privacy for digital payments be preserved, while ensuring stability and regulatory compliance? In this feasibility study co-authored by @etonec_gmbh, @MinaFoundation, @Privatbank1796, and @SnT_uni_lu we show how it can be done.“ FIND THE THE FULL STUDY HERE

Overall, the combination of a 100% collateralized stablecoin with innovative privacy features can bring a number of benefits to the financial ecosystem, including increased security, stability, and confidentiality.

Conclusion

Overall, technological progress has the potential to help address many of the challenges facing the world today, and it will likely continue to play a crucial role in finding solutions to these problems in the future.

December 2022 seems to be a good month in this respect. A month that shall give hope.

Innovation & Business Press & Publications Society & Diplomacy

Experts Exchange to develop prosperity, freedom, social participation and sustainability: The Federal Government Digital Summit 2022

Jochen Werne December 9, 2022

It was a great pleasure to meet again personally and be connected virtually with friends like Dr. Andreas Heindl and Dr. Johannes Winter who, like many others inside and outside this Digital Summit, dedicate their passion to the digitisation of Germany day after day. Their passion is the engine for Germany’s competitiveness and prosperity. Exchanges like today between Germany’s leading experts in the field of digitalisation and the German government are crucial for the country’s future innovation.

This was underlined today by Federal Chancellor Olaf Scholz and the ministers Robert Habeck, Volker Wissing, Nancy Faeser and Bettina Stark-Watzinger. A special motivation was given by Estonian Prime Minister Kaja Kallas and Japan’s Digital Minister Tarō Konō.

Congratulations to the organization committee and thank you for the kind invitation. Details can be found HERE

Digital Summit 2022

Germany’s digitisation continues to remain one of the main topics of the German government. The aim is to accelerate and promote digitisation processes and to exploit their potential to develop prosperity, freedom, social participation, and sustainability.

In this context, the Digital Summit remains the central platform for shaping the digital transformation with all parties involved. It focuses on the key fields of action within the digital transformation across ten topic-based platforms. The platforms and their focus groups are made up of representatives from business, academia and society who, between summit meetings, work together to develop projects, events and initiatives designed to drive digitisation in business and society forward. The Summit will serve to present the results of the work that has been done in the past, to highlight new trends and discuss digital challenges and policy approaches.

This year’s Digital Summit of the Federal Government will be held on 8 and 9 December 2022. The Federal Ministry for Digital and Transport and the Federal Ministry for Economic Affairs and Climate Action will jointly coordinate the summit’s preparation in the future. In the new legislature, new formats, concrete results and international impulses are to make it the driving force and showcase for digitisation in Germany and beyond.

Press & Publications

What do Napoleon, the Rothschilds and the Duke of Wellington have to do with CIT industry?

Jochen Werne November 18, 2022

In their historical-social debate “Cash, book money, cryptocurrencies and the digital euro“ on money in the digital age in the book “Praxisbeispiele der Digitalisierung” (Practical Examples of Digitalisation) published by Springer Gabler Verlag, the co-authors Jochen Werne and Johannes Winter use historical examples to show the interconnectedness of various actors in the cycle of our money today.

Read an excerpt of chapter 9.3.1. on the historical role of CIT – cash in transit here:

Making money available and the central role of cash-in-transit logistics

In the case of cash, the person concerned has direct, unrestricted physical power of disposal over his money in the form of coins or banknotes. However, the fact that this is not yet given when the money is minted or printed in bank vaults, but only when it is delivered to the owner, is of crucial importance. To illustrate the importance of this step and thus also the role of the transport of money and valuables, a historical event from the Rotschild Archives can be used.


„The Rothschilds supplied the Duke of Wellington with gold during the Napoleonic Wars and saved Wellington’s armies from almost certain defeat. Between 1793 and 1815, Britain was almost continuously at war with France, which placed an enormous burden on the British treasury. By 1813, Wellington’s armies had managed to push the French back as far as the Pyrenees, but the financial situation had become critical. Wellington desperately needed gold and silver coins that he could exchange locally to pay and feed his troops and thus maintain morale. J.C. Herries, the British government’s chief commissioner, was responsible for financing and equipping the British armies in the field. Herries was looking for a middleman who could secretly procure large quantities of gold without alerting the French. In January 1814 he officially engaged Nathan Mayer Rothschild. Over the previous five years Nathan had built up an extensive network of couriers, dealers, brokers and bankers to facilitate his gold trading activities. Over time, he had established a dominant position as a gold broker in the City of London. After receiving the commission from Herries, Nathan instructed his brothers on the Continent to buy gold wherever they could, secretly and in small quantities so as not to disturb the market. Once the gold was gathered, it was shipped and forwarded to Wellington in the south of France so that he could pay his troops” (Rothschild Archives 2021).

Alongside many small and medium-sized players, the three corporations Prosegur, Brinks and Loomis dominate the main part of the consolidating world market for cash and cash-in-transit. By supplying retailers, banks and private individuals via ATMs and branches, as well as repatriating funds, the industry ensures that the cash cycle is maintained and that each individual’s power of disposal over cash is upheld.

BUY THE BOOK HERE

Innovation & Business Press & Publications

Interview: Prosegur‘s Jochen Werne on the relevance of networks and keeping track of the bigger picture

Jochen Werne October 28, 2022

THANK YOU CATHARINA and BENTE FOR A GREAT TALK.

Please find the original talk HERE

In the midst of these crazy times, most industries still haven’t gotten their shit together. However, a few bright minds managed to understand the paradigm shift, act accordingly and reap the rewards. So, Catharina van Delden and Bente Zehan talked to some of them! Join us on our learning journey over the next few weeks to see how completely unrelated industries deal very differently with the same challenges we all share – and let’s become better together!

Jochen Werne is Prosegur’s Chief Development and Chief Visionary Officer since 2019. Before that, he worked at different banks, most recently as a director of the German Bankhaus Lenz & Co. Since the beginning of 2022, he is also the managing director of Prosegur Crypto, which is applying for a crypto custody license in Germany. 

The Madrid-based company Prosegur offers different security services worldwide. They’re most famous for their cash-in-transit services, with more than 50% market share in Germany. In recent years, Prosegur has explored ways to provide digital security services based on its long experience in a non-digital world. 

How do you develop new business models and drive innovation within a company that makes its money with a very traditional business model like cash-in-transit? 

I would like to jump right in with a personal example: Before I joined Prosegur in 2019, I had a career in banking. When you work in treasury, you have a lot of money you need to invest. As a bank, we were engaged in the investment business and in our case, most of the money had to be invested in the short term, unfortunately within a negative interest rate environment throughout the last years. So, the best solution would have been to put your money under the mattress instead of in a bank account. When I joined Prosegur, I explained this pain point and we discussed how we could solve this problem for treasurers. Since anything which has fewer costs than 0,5% is considered profit for a treasurer, we offered asset managers, high net worth individuals, and banks custody of short-term liquidity fully insured and compliant in our high-security facilities. 

You’re in the security sector. From another conversation I recall you talking a lot about feeling safe vs. actually being safe – an image Catharina and I discussed before starting this series. Our example is a house standing by a cliff, with that a giant tsunami arriving. Instead of thinking about how to relocate, many industries seem to wonder about putting solar panels on the roof and perhaps repainting. Both are valid things to do – however, perhaps they’d have a different focus if they had zoomed out. Is that also a topic within your company, and how do you handle such problems? 

This is how new business models and innovations can emerge: You have to take a different perspective, look at other people’s problems and find solutions based on your own experience and knowledge. That is an excellent picture. And if you take that into account, I think also from a psychological point of view, we live in our bubbles. Let’s take, for example, the phenomenon of social media: You “privately” click a like button, watch a video, or comment on a post without really knowing how much this very private behavioral data is influencing an algorithm (which in the best case just targets you as a potential buyer of a certain product). After all, you are only doing it “privately” – but you’re not! If you were to zoom out, you’re back at your tsunami example. It happens in everyday discussions, from climate change to energy crises. Sometimes, people take a point of view and go blindly in one direction. If you’re able to zoom out, you’re also able to change your behavior and find many more solutions to problems. 

When making decisions and discussing innovations, it’s important to accept that you yourself are not able to see the whole picture. And based on that, you should go into discussions with an open mind – without thinking you’re completely right and cannot learn anything from the others. Innovation can only happen when people think outside the box, try to understand the whole picture, make new connections, and then act on their new insights. 

Business leaders also need to ask themselves how they can innovate. Do they talk about the future, about what they need to create, and how it is no longer the same? Or are they just pushing to quickly return to their classic KPI models, missing the direction the rest of the world is moving in? 

How do you take actions from the big picture and implement them? Basically, how do you zoom in again? 

Prosegur works in an industry with low-profit margins. We can never sit back and say, “Yes, we have a wonderful company here, everything is going great!” It is labor-intensive work with – obviously – high labor costs. 

So we can’t afford to be just visionary; we also need to focus on the essentials. We need justified results every month. Therefore, more than in other sectors, the rule is: if you deliver results, people will listen to you. It’s also part of my job to enthuse people and help them understand new concepts. But I wouldn’t say that’s purely related to my role; anyone in a leadership position should see it that way. Prosegur is a big matrix organization, so you have to use your network to move things forward. 

In security, there are a lot of processes with rigid security protocols that won’t be changed in an agile approach quickly and easily. But with other and industry-adequate means the teams are improving efficiency every day. 

How do you go about that? 

People have to be trained. Otherwise, it won’t work. You have to get people to change. But don’t be surprised that the goal will never be achieved 100% because you will never get everyone to embrace change. Resistance to change within the individual is far too great and it’s very often just too convenient to stay in the comfort zone. 

I would like to come back to your example of the house on a cliff. I have seen people who’ve ended up in a disaster professionally because they didn’t want to or were afraid to go into action. You have to be open-minded and sometimes even force yourself out of your personal comfort zone.   

You founded Prosegur Crypto GmbH – a business model that to the untrained eye has little to do with your core business: cash. In convincing your board this is a relevant thing to do what are your learnings regarding the degree decision-makers need to understand new technology? Should everyone become a super tech expert?  

I don’t ask the whole company’s management to be full experts on all technologies. That’s impossible. But please – as a responsible decision-maker – understand the leading technologies existing in this world! For example, as a banker, you should understand the concept behind blockchain. Of course, this is very technological, and most people can’t explain it in a good manner, but you must understand it. To better understand, decision-makers should have a “new-in-tech” training every couple of months, besides all the usual management training. 

So, my appeal to every business leader is: Take your time and try to at least get the gist of things. You should understand what technology can and cannot do, and not just follow your daily headlines. The second part is to really listen to your existing experts whom you pay to know all the details. They need to be at the table and give their input to assess the next useful steps. 

Lastly, we’ve talked a lot about networks. What are your best practices regarding this? 

It is one of my favorite topics! First of all, you need to know that networks have not just existed since social media came into existence but have always existed. Network organizations have always brought – likewise interested – people together. Unfortunately, also on this topic, we do have to step out of our comfort zones to broaden our perspective. Otherwise, our networks take us as prisoners and we are as the known proverb says birds of the same feather who flock together.  

There is very good literature on networks: like “The Square and the Tower” by Niall Ferguson or “The Starfish and the Spider” by Ori Brafman and Rod Beckstrom. Everyone should read these books. 

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Tl;dr for the lazy

• People live in their bubbles and make themselves too comfortable within them, even if it sets them up to fail. It’s important that companies (and we as a society) zoom out to see the bigger picture. 
• Innovation and new business development can only happen if you combine your own experiences and opinions with other points of view. 
• Companies need to go beyond just recreating and reusing what has already worked for them. They should start asking questions and finding solutions that truly bring them on the right paths into the future. Even or especially if that means that they need to get out of their “safe space” (which is not so safe after all). 
• Instead of judging ideas and innovations as being “good or bad”, look at what they “can and cannot do” 
• You need to train and communicate openly with people to overcome the resistance towards change.