A shorter month brings a shorter, but no less compelling, Sibos programme exploring digitisation and quantum computing in a range of contexts.</em></p> In ‘How much closer are we really?’, market structure and technology experts examined recent experiments in asset tokenisation for indicators of the future direction for both payments and securities. </p> The pandemic might have accelerated digitisation, but big challenges remain. </p> </figure> We’re going to need multiple kinds of approaches in order to settle on the right solutions </p></blockquote> Tim Grant, head of SIX Digital Exchange </p> </div></div> “We’re going to need multiple kinds of approaches in order to settle on the right solutions,” said Tim Grant, head of SIX Digital Exchange, noting the range of retail and wholesale central bank digital currency (CBDC) projects under way. </p> Large obstacles and opportunities exist for retail CBDC initiatives which offer the prospect of non-banks, i.e. individuals and companies, settling payments in central bank money for the first time, if privacy issues can be resolved. </p> This transforms risks and responsibilities, according to Alexander Bechtel, head of DLT and digital asset strategy at Deutsche Bank, with banks and payment service providers (PSPs) managing client relationships without needing to hold central bank reserves. </p> Wholesale CBDCs offer cost-efficiency benefits over existing processes and infrastructures in both payments and securities. If they can achieve cross-border interoperability, they may overcome deep-seated inefficiencies in correspondent banking, panelists said, as well as providing the cash leg for the trading of tokenised assets, similar to the role of central bank money in securities trading.</p> </figure> Tokens plus digital currency within inter-operational platforms is the key to success” </p></blockquote> Ekaterina Frolovicheva, former head of digital ventures at VTB Bank </p> </div></div> “Tokens plus digital currency within inter-operational platforms is the key to success,” said Ekaterina Frolovicheva, former head of digital ventures at VTB Bank. </p> No good in isolation</strong></p> In the second session, ‘Trade digitisation taxonomy’, we learned from Francesca Nenci, global co-head of trade finance at UniCredit, that trade finance transactions can involve 30 to 50 stakeholders, 30 to 35 documents and 80 printed pages.</p> In this context, is there such a thing as too much digitization? Joshua Kroeker, chief product officer at Contour, welcomed a recent explosion of technology-led innovation, resulting in multiple platforms and products seeking to increase efficiency and automation. </p> “But everyone having their own pet project in their own backyard for one or two products is not the way to common infrastructure,” he said, calling for best-in-class platforms to combine and collaborate to create a fully interoperable global network. </p> Ludivine Assayag, head of trade finance structuring at Crédit Agricole, said progress had already been made through the application of proven technologies to individual elements of the trade finance value chain, such as RPA in credit decisions. </p> She further emphasised the need for consolidation and collaboration, arguing that DLT could be “a game-changer”.</p> “In the long-term, it will allow the emergence of platform business models. This will allow transparency, trust, data integrity and speed of execution to the benefit of clients, but it will not happen overnight,” Assayag said, citing the need for legal reforms and wider adoption of common standards.</p> An existential threat</strong></p> February’s Sibos programme concluded with a Sibos Academy session on the security risks posed by quantum computing to the finance sector. </p> Recent research suggests quantum computing could have the power to break today’s public key cryptography within 15 years, posing an existential threat to all reliant services and infrastructures. But it could be much sooner. IBM expects to demonstrate one of the core building blocks of quantum computing (a fully controllable fault-tolerant qubit) by 2023. </p> </figure> People will no longer trust any secure communication channel” </p></blockquote> Dimitri van Esch, quantum lead, ABN AMRO Bank </p> </div></div> How great is the risk? ABN AMRO Bank’s preparations include a ‘quantum apocalypse’ scenario in which news of cryptographically-relevant quantum computing prompts a run on the banking system. “People will no longer trust any secure communication channel,” said quantum lead Dimitri van Esch, warning public confidence in banks could fail before their systems do. </p> </figure> Cryptography algorithms are buried pretty deep into applications and infrastructure” </p></blockquote> Sandy Carielli, principal analyst, Forrester Research </p> </div></div> How easy is the fix? Based on prior experience, not very. “Cryptography algorithms are buried pretty deep into applications and infrastructure,” said Sandy Carielli, principal analyst at Forrester Research. “It’s not as simple as layering something on top. Often, you have to go deep into legacy code that hasn’t been touched for up to 15 years.”</p> How long will it take? It could need 7-11 years to upgrade every piece of technology in the finance sector, says Steve Stevens, executive director of US finance sector standards body ASC X9, who remembers the six-year campaign to ready ATMs for the much simpler challenge of Y2K. “We need to think ahead. The more we do, the cheaper the upgrades will be,” said Stevens. </p>