Five things to know: Digital Digest August 2023


In this edition of our award-winning Digital Digest, we examine the role that industry, technology and regulators play in meeting the challenges of our digital future.

August 2023

This edition deep dives into the “man versus machine,” workplace of the future debate that has recently made waves in the cultural discourse around artificial intelligence (AI) and ChatGPT – and what it all means for digital finance.

1. Blockchain and AI have the potential to complement each other’s growth
Blockchain stands to accelerate the adoption of emerging technologies, such as AI, cloud computing and Internet of Things (IoT) by bringing in the missing element of trust that businesses need to fully embrace these technologies at scale. Business networks can benefit from the integration of these technologies into modern blockchain platforms and applications.

2. Emerging technologies present risks to digital finance
Quantum algorithms can potentially break widely-used cryptographic protocols and algorithms that rely on the computational difficulty of factoring large numbers (e.g., Bitcoin mining). This precipitates the need for quantum-resistant cryptography that ensures financial security and sensitive data. However, this can be a systemic problem for blockchain and distributed ledger technology (DLT), which have embedded cryptography in the verification and validation system of transactions and provenance link ability.

3. The role of the human in an AI-driven business world
People have a great opportunity to be creative, solve problems and create new value for their clients in the fourth industrial revolution. As technology is front and center, the real recognition is how workforces continually improve and accelerate. In parallel, we must also consider and manage the transition from traditional-to-digital successfully amongst people, processes and technology.

4. Regulators up the ante on CBDCs and stablecoins
As the storm clouds from the crypto winter start to break and calmer weather takes hold with an increased focus on tokenization, there is renewed attention from the industry on how to enhance the efficiency of the payment leg of tokenized asset transactions. In these discussions, stablecoins and central bank digital currencies (CBDCs) are often identified as potential solutions.

5. Long-term Bitcoin investors stay away, despite a good month
Bitcoin continues to recover ground lost during last year’s crypto bloodbath, gaining 10 percent in June, having now retraced approximately 25 percent of its peak-to-trough decline. This marks a sharp outperformance versus other major asset classes, and added approximately 60 basis points of incremental return to a diversified portfolio. However, the flow-based drivers of Bitcoin’s performance are, perhaps, grounds for caution. Aggregate flows, as captured in data from Glassnode, suggest aggregate inflows in the first six months of the year were modest, when compared to investor interest in equities and fixed income.



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