Showing posts with label FinanceInnovation. Show all posts
Showing posts with label FinanceInnovation. Show all posts

Saturday, October 17, 2026

Deutsche Bank Is Weeks From Crypto Custody. What Will Clients Get On Day One?

Deutsche Bank is weeks from crypto custody. What will clients get on day one? - 1

Deutsche Bank says its first institutional digital asset service is weeks away. Its own product material already lists Bitcoin, Ether and three stablecoins, but its executive described a rollout beginning with major cryptocurrencies before adding ways to move into and out of stablecoins. The difference between a supported asset, a custody account ready for a particular customer, and a live conversion service is the central question for launch day……..Continue reading….

By

Source: Crypto News

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Critics:

While most stablecoins are non-interest bearing and therefore do not provide interest returns to the holder, some issuers and service providers began offering yield-bearing stablecoins in an attempt to gain market share. The reason most stablecoins with centralized issuers do not provide interest return is because that would potentially make them financial securities, thus falling under regulatory regime.

Both the US’s GENIUS Act and Hong Kong’s Stablecoin Bill explicitly prohibit the provision of yield-bearing stablecoins by regulated issuers. Research suggests that by providing interest return on stablecoin, holders of stablecoins would be less likely to sell, thus reducing the risk of a run on stablecoins. While issuers may not directly provide interest return, decentralized financial platforms are another possible avenue for earning interests.

By providing stablecoins for liquidity on decentralized platforms, holders of stablecoins can get a share of the fees paid by liquidity takers. This process is known as “yield farming”. Contrary to popular belief, yield farming is not risk free, because the holders are engaged in lending activity. In the case of the TerraUSD, initially to drive adoption, the Anchor protocol was created to offer a yield of 19.5% to depositors of the stablecoin, a rate much higher than the return on US Treasuries.

Thus, a large amount of the stablecoin is locked in the Anchor protocol. Subsequently when the price of TerraUSD began to crash. The holders are unable to cash out of their position and are left holding the bag. The value of a fiat-backed stablecoin is based on the value of the backing currency, which is supposedly held by a third party custodian.

The issuer defends the peg of the stablecoin by holding mostly fiat-denominated short-term assets, such as treasury bonds, high-quality commercial paper, repurchase agreements and bank deposits. Therefore, the structure of fiat-backed stablecoins closely resembles that of money market funds (MMFs), and are exposed to similar risk of large-scale redemption requests causing negative fire-sale contagion effects on the financial system.

As of August 2025, nearly 99% of fiat-backed stablecoins are pegged to the US dollars. Major examples of US dollar pegged stablecoins are Tether’s USDT, Circle’s USDC, and Binance’s BUSD. For Euro pegged stablecoins, major examples would include Circle’s EURC, EUR Tether and Stasis EUR. Cryptocurrency-backed stablecoins are stablecoins using other cryptocurrencies as collateral.

The reason such stablecoins are created is that by utilizing smart contracts, they allow a decentralized network to track the price of US dollar as closely as possible. Another use case of cryptocurrency-backed stablecoins is to convert a cryptocurrency into ERC20 compatible standard to enable trading on another blockchain. Major examples of cryptocurrency-backed stablecoins are DAI and Wrapped Bitcoin (WBTC).

Commodity-backed stablecoins are stablecoins that claim to be backed by commodities. Examples are PAX Gold and Tether Gold. Algorithmic stablecoins, sometimes called seigniorage-style stablecoin, are stablecoins with no reserve assets or only partial reserve assets. They utilize algorithms that match supply and demand to maintain a stable value. The European Central Bank suggests that algorithmic stablecoins should be treated as unbacked crypto-assets.

Some major examples of algorithmic stablecoins are Celo Dollar, Tron’s USDD and Kava’s USDX. The main advantage of stablecoins is they provide convenience for investors in cryptocurrencies, allowing investors to park their money while buying and selling other more volatile cryptocurrencies. Stablecoins are used for cross-border payments, especially for cross-border remittance to less developed countries.

Cross-border payments are traditionally associated with high transaction costs, prolonged processing times, and limited access for unbanked populations. Since stablecoins can be sent using a smartphone, it can facilitate faster cross-border transactions for individuals with limited access to financial institutions. Stablecoins are being used in countries with hyperinflation, such as Argentina, Turkey, and Venezuela. Due to monetary policies of these countries, average citizens are often unable to obtain foreign currencies through formal financial services.

Since some stablecoins could maintain a relatively steady value against specific assets such as the US dollar, they are used as a hedge against hyperinflation. Research have shown that the price of fiat-backed stablecoins can dip below the value of the pegged currency due to limited participation in the primary market and sell pressure in the secondary market.

Since fiat-backed stablecoins are structurally similar to money market funds, they pose similar contagion risk, in which a large amount of redemption caused the selling of underlying assets, further pushing down the price of the underlying assets and creating more demand for redemption. Reserved-backed stablecoins require a third party custodian to hold the reserve assets to maintain price stability.

The concentration of reserve deposit create a counterpart risk in which the custodian may fail in the case of a bank run. In March 2023, the price of Circle’s USDC de-pegged temporarily during the banking crisis in the United States in which Signature Bank, Silvergate Bank, and Silicon Valley Bank collapsed. Tether’s USDT is currently the world’s largest market capitalization stablecoin. Tether initially claimed their stablecoin is fully backed by fiat currency.

However, in October 2021, it failed to produce audits for reserves used to collateralize the quantity of minted USDT stablecoin. Tether were fined $41 million by the Commodity Futures Trading Commission for deceiving consumers. The CFTC found that Tether only had enough fiat reserves to guarantee their stablecoin for 27.6% of the time during 2016 to 2018.

Since then, Tether began issuing assurance reports on USDT backing, although some speculation persists regarding the use of Chinese commercial paper for reserves. As at March 2025, Tether had never completed an audit by an accounting firm.

Trump-Linked WLFI blocks token launch hacks with onchain blacklisting

“What are stablecoins and how do they work?”. Bank of England. 6 November 2023. Retrieved 1 August 2025.

Stablecoin growth - policy challenges and approaches”

EU should close gaps in stablecoin rules, ECB’s Lagarde says

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DeutscheBank ,CryptoCustody ,Blockchain ,DigitalAssets ,Cryptocurrency ,FinanceInnovation ,BankingInnovation ,CryptoTrends ,InvestmentStrategy ,Fintech ,WealthManagement ,AssetSecurity ,FutureOfFinance ,CryptoInvestment ,DigitalBanking ,EconomicGrowth ,SecureInvesting ,CryptocurrencyNews ,BankingServices

Tuesday, September 8, 2026

Fintechs And Bigtechs Share The Spoils As Gen AI Reshapes Financial Services

Financial services is proving to be a sweet spot for generative AI applications

Getty

Since OpenAI launched ChatGPT-4, the biggest names in technology as well as myriads of wannabe start-ups have scrambled to create marketable solutions powered by generative AI. It didn’t take long for the analysts to work out that financial services is the sweet spot for gen AI. Banks, insurers and capital markets firms are a lot more complex than the average manufacturer or retailer, with a large proportion of processes that lend themselves to automation or augmentation (see the chart below). They are also subject to more regulation, with a compliance burden that demands a vast amount of data and manual effort………Continue reading….

By David Parker

Source: Forbes

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Critics:

Financial technology has been used to automate investments, insurance, trading, banking services and risk management. Robo-advisers are a class of automated financial adviser that provide financial advice or investment management online with moderate to very little human intervention. They provide digital financial advice based on mathematical rules or algorithms and can even create and manage automated investment portfolios.

This can provide a lower-cost alternative to a human adviser and also has the ability to avoid human error and bias. Global investment in financial technology increased more than 12,000% from $930 million in 2008 to $121.6 billion in 2020. 2019 saw a record high with the total global investment in financial technology being $215.3 billion, of which Q3 alone accounted for $144.7 billion in investment.

In H1 2021, fintech deal volume hit 2,456 deals accounting for $98 billion in investment. Global VC investment was higher than $52 billion in H1’21, close to the annual record of $54 billion seen in 2018. H1’21 saw $21 billion in corporate-affiliated VC investment. CVC deal volume reached a high of 284 in Q1’21, and then grew further to 312 in Q2’21. The Americas saw about $51.4 billion of fintech investment in H1’21, with the US alone accounting for $42.1 billion.

In the EMEA region, investment in fintech was very robust at $39.1 billion. In Asia-Pacific, fintech investment grew between H2’20 and H1’21—rising from $4.5 billion to $7.5 billion, although it was subdued in comparison with previous record highs. The nascent financial technology industry in London has seen rapid growth over the last few years, according to the office of the Mayor of London. Forty percent of the City of London‘s workforce is employed in financial and technology services.

As of April 2019, about 76,500 people form the UK-wide FinTech workforce, and this number is projected to rise to 105,500 by 2030. Of the current fintech workforce in the UK, 42% of workers are from overseas. In Europe, $1.5 billion was invested in financial technology companies in 2014, with London-based companies receiving $539 million, Amsterdam-based companies $306 million, and Stockholm-based companies receiving $266 million in investment.

After London, Stockholm is the second highest funded city in Europe in the past 10 years. Europe’s fintech deals reached a five-quarter high, rising from 37 in Q4 2015 to 47 in Q1 2016. Lithuania is starting to become a northern European hub for financial technology companies since the news in 2016 about the exit of Britain from the European Union. Lithuania has issued 51 fintech licenses since 2016, 32 of those in 2017. Fintech companies in the United States raised $12.4 billion in 2018, a 43% increase over 2017 figures.

In the Asia Pacific region, the growth will see a new financial technology hub to be opened in Sydney, in April 2015. According to KPMG, Sydney’s financial services sector in 2017 creates 9 per cent of national GDP and is bigger than the financial services sector in either Hong Kong or Singapore. A financial technology innovation lab was launched in Hong Kong in 2015. In 2015, the Monetary Authority of Singapore launched an initiative named Fintech and Information Group to draw in start-ups from around the world.

It pledged to spend $225 million in the fintech sector over the next five years. While Singapore has been one of the central fintech hubs in Asia, start ups in the sector from Vietnam and Indonesia have been attracting more venture capital investments in recent years. Since 2014, Southeast Asian fintech companies have increased VC funding from $35 million to $679 million in 2018 and $1.14 billion in 2019.

Africa’s overall fintech sector has expanded quickly. There were more than 1000 active businesses as of April 2022, up from 450 in 2020. The venture capital sector, which saw deal value rise from $485 million in 2020 to $3.23 billion in 2021, was mostly responsible for the increase in investment in Africa. About half of this investment was made in fintech with Nigeria, Kenya and South Africa remaining key markets in the West, East, and South respectively. 

Fintech companies use a variety of technologies, including artificial intelligence (AI), big data, robotic process automation (RPA), and blockchain. AI algorithms can provide insight into customer spending habits, allowing financial institutions to better understand their clients. Chatbots are another AI-driven tool that banks are starting to use to help with customer service. AI enables personalized financial services, enhanced fraud prevention, financial inclusion, and sustainable investing.

It’s anticipated to drive massive value creation in the fintech sector, notably in predictive finance and automated decision-making. Advancements in deep learning and large language models (LLM) are pivotal for AI-driven investment strategies, enabling real-time market adjustments and personalized investment strategies tailored to individual risk profiles. 

Furthermore, AI and Machine Learning (ML) contribute to improved efficiency, better risk management, cost savings, and an enhanced customer experience in financial institutions. Big data can predict client investments and market changes in order to create new strategies and portfolios, analyze customer spending habits, improve fraud detection, and create marketing strategies.

Robotic Process Automation is an artificial intelligence technology that focuses on automating specific repetitive tasks. RPA helps to process financial information such as accounts payable and receivable more efficiently than the manual process and often more accurately. Blockchain is an emerging technology in finance which has driven significant investment from many companies. The decentralized nature of blockchain can eliminate the need for a third party to execute transactions.

Financial magazine Forbes created a list of the leading disruptors in financial technology for its Forbes 2021 Global Fintech 50. In Europe there is a list called the FinTech 50, which aims to recognise the most innovative companies in fintech. A report published in February 2016 by EY commissioned by the UK Treasury compared seven leading fintech hubs: the United Kingdom, California, New York City, Singapore, Germany, Australia and Hong Kong.

It ranked California first for ‘talent’ and ‘capital’, the United Kingdom first for ‘government policy’, and New York City first for ‘demand’. For the past few years, PwC has posted a report called the “Global Fintech Report”. The 2019 report covers many topics of the financial technology sector, describing the landscape of the fintech industry, and some of the emerging technologies in the sector. And it provides strategies for financial institutions on how to incorporate more “fintech” technologies into their business.

Finance is seen as one of the industries most vulnerable to disruption by software because financial services, much like publishing, are made of information rather than concrete goods. In particular blockchains have the potential to reduce the cost of transacting in a financial system. While finance has been shielded by regulation until now, and weathered the dot-com boom without major upheaval, a new wave of startups is increasingly “disaggregating” global banks.

However, aggressive enforcement of the Bank Secrecy Act and money transmission regulations represents an ongoing threat to fintech companies. In response, the International Monetary Fund (IMF) and the World Bank jointly presented Bali Fintech Agenda on October 11, 2018 which consists of 12 policy elements acting as a guidelines for various governments and central banking institutions to adopt and deploy “rapid advances in financial technology”.

The New York Venture Capital Association (NYVCA) hosts annual summits to educate those interested in learning more about fintech. In 2018 alone, fintech was responsible for over 1,700 deals worth over 40 billion dollars. In 2021, one in every five dollars invested by venture capital has gone into fintech. In addition to established competitors, fintech companies often face doubts from financial regulators like issuing banks and national governments. 

In July 2018, the Trump Administration in the United States issued a policy statement that allowed fintech companies to apply for special purpose national bank charters from the federal Office of the Comptroller of the Currency.Federal preemption applies to state law regarding federally chartered banks. Data security is another issue regulators are concerned about because of the threat of hacking as well as the need to protect sensitive consumer and corporate financial data.

Leading global fintech companies are proactively turning to cloud technology to meet increasingly stringent compliance regulations. The Federal Trade Commission provides free resources for corporations of all sizes to meet their legal obligations of protecting sensitive data. Several private initiatives suggest that multiple layers of defense can help isolate and secure financial data.

In the European Union, fintech companies must adhere to data protection laws, such as GDPR. Companies need to proactively protect users and companies data or face fines of 20 million euros, or in the case of an undertaking, up to 4% of their total global turnover. In addition to GDPR, European financial institutions including fintech firms have to update their regulatory affairs departments with the Payment Services Directive (PSD2), meaning they must organise their revenue structure around a central goal of privacy.

Any data breach, no matter how small, can result in direct liability to a company (see the Gramm–Leach–Bliley Act) and ruin a fintech company’s reputation. The online financial sector is also an increasing target of distributed denial of service extortion attacks. This security challenge is also faced by historical bank companies since they do offer Internet-connected customer services.

 Many fintech technologies have very high start-up costs but very low marginal costs for adding additional customers, effectively necessitating many fintech companies to act as natural monopolies. European Regulation on Fintechs refers to the body of laws, directives, and guidelines that govern the operation, development, and innovation of financial technology (fintech) companies in the European Union (EU).

As the fintech sector has rapidly evolved in recent years, the European Commission and European Parliament have introduced various regulatory frameworks to maintain financial stability, promote innovation, and protect consumer interests. These frameworks aim to create a single market for fintech services, while also addressing the emerging risks and challenges associated with new financial technologies.

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