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Wealth Management

SECURING CRYPTO ASSETS ON THE BLOCKCHAIN

By Andre Stoorvogel, Director of Product Marketing, Rambus Payments

 

The rapid expansion of the cryptocurrency ecosystem demonstrates the power of the blockchain to revolutionize financial services and beyond. Yet at the same time, the inherent volatility provides a cautionary tale.

 

With blockchain implementations gaining traction, it is clear that a new approach is required to enhance the security and usability of crypto and digital assets. But how can this be achieved?

 

A token gesture or real security?

Tokenization is a trusted, proven technology already used to secure billions of payments in-store and online.

The good news is that this process can be applied to crypto assets.

 

By replacing sensitive credentials – such as the private keys for blockchain and cryptocurrency – with a unique token that can restrict use to a particular device or channel, tokenization mitigates fraud risk and protects the underlying value of credentials.

 

This is because tokens cannot be used by a third party to conduct transactions if intercepted, adding a layer of frictionless security that complements the immutability of the blockchain.

 

Two signatures are better than one

Employing multiple signature is another way to enhance security, through the introduction of additional distributed keys for recovery and authentication.

 

In practice, this requires at least two signatures to confirm a transaction, increasing security and preventing fraud. It also allows consumers to safely recover their public or private key if it is lost.

 

Importantly, as this approach still relies on the use of original keys that are vulnerable to attack, multi-signature functionality is only truly effective when combined with tokenization technology to ensure vulnerable original keys are protected if attacked.

 

Hard to hack ≠ hard to access

Until recently, the storage of crypto assets fell into one of two categories – hot and cold wallets.

Hot wallets are online storage services provided by exchanges, for example. Cold wallets are offline storage options and can range from USB devices to pieces of paper.

 

Both options have their problems. Hot wallets are constantly connected to the internet, meaning the vulnerable private keys are susceptible to attack from hackers and fraudsters. Cold wallets, while secure from hackers, limit the usability of cryptocurrencies. What’s more, if it is misplaced, or the hard drive corrupted, access to an asset will be irrevocably lost.

 

Given these challenges, it is apparent that there is a need to combine the security benefits of offline cold wallets with the convenience of an online wallet.

 

Segregated wallets fulfil this need by enhancing cold wallets with an additional security layer. When a user wants to access their asset, they can do so via a two-factor authentication protocol, which instantly makes their cold wallet warm. And by securing the asset in a cold environment, it cannot be hacked.

 

Usability – it’s the way forward

The usability problem for cryptocurrencies goes beyond just storage. The process of buying and selling is needlessly complex for novices and experts alike. From a security perspective, unfamiliar platforms and websites are an easy target for fraudsters.

But with many consumers now using online and mobile banking, there is a huge opportunity to incorporate blockchain solutions into the everyday experience. This will enable consumers to simply and securely access, trade and own multiple cryptocurrencies within a familiar environment.

 

A secure, convenient future for blockchain implementations

For a technology to be truly transformative, a secure foundation of trust and transparency is needed. Solutions that enable the secure storage and transfer of crypto assets, while democratizing access and improving the user experience, have the potential to enable this powerful technology to reach its full potential.

Interested in learning more about securing crypto assets on the blockchain? Download the Rambus eBook series now.

 

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Wealth Management

THE END OF YEAR TAX CHECKS THAT COULD SAVE YOU THOUSANDS

Charlie Reading, Founder and MD of Efficient Portfolio

After HMRC’s tax return deadline at the end of January, it can be tempting to drop your guard, believing that your new tax bill is a long way away.

It’s true, you’ve got a whole year until the next bill is due. What most don’t consider, however, is that there is a range of checks that you can do reduce that bill significantly.

Astute investors make use of their tax-free allowances every year and save thousands of pounds in the process. With such massive savings on the line, it’s a strategy to certainly consider.

With that, here are some easy checks and tips from Charlie Reading, Founder and Managing Director of Efficient Portfolio chartered financial planners, that could start you on your way to a much leaner tax bill:

 

Charlie Reading

1. Maximise Your ISA Allowances

Good returns, flexibility, diversity and tax efficiency should be key components in your financial strategy, and the ISA helps to deliver all of these. Historically, ISAs have been at the cornerstone of tax-efficient saving and are often referred to as one of the essential steps in your strategy, as they can help your wealth grow without you being penalised by heavy tax charges. They are an incredibly useful way of saving, and, as such, it is generally encouraged that people take advantage of their benefits. However, the ISA allowance is offered on a ‘use it or lose it’ basis, so if you fail to maximise it, you can’t make up the funds later on.

Up until 5th April 2020, you can contribute up to £20,000 into an ISA, and a further £20,000 from 6th April 2020, thereby sheltering up to £40,000 per person, as long as you’re over 18.

 

2. Top Up Your Pension While You Still Can

At the time of writing, the highest level of State Pension you can receive is £129.20 a week, which is frankly a paltry sum to live on. That’s why saving for the future is so important. It might seem wise to enjoy life now and worry about retirement later, but you’d only be damaging your future quality of life.

Pensions are a highly tax-efficient way of saving and now offer a great deal of flexibility in retirement, as when you retire you can gain access to 25% of your pension pot as a tax-free lump sum, with the remainder taxed at your marginal rate.

The current pension annual allowance is set at £40,000, so if saving for your future is a priority, it is worth investigating which pension is right for you, sooner rather than later.

 

3. Protect Your Estate from Tax

Inheritance Tax (IHT) is a concern for people from all walks of life. If you are hoping to leave a legacy to your loved ones, the last thing you would want is for that legacy to be taxed at 40% and lost to the Government.

One simple way of combatting this is to consider using your annual IHT allowance. During your life, you are allowed to give away £3,000 per year without incurring any IHT charges upon your death. There are of course downsides to this, in that you lose all access and control over the money, but it may be a tax-efficient strategy to consider.

 

4. Don’t Overpay Your Capital Gains Tax

The final tax consideration at this time of year is Capital Gains Tax, which is also given on a ‘use it or lose it’ basis and is currently set at £12,000. The issue of Capital Gains Tax is most acute if you hold investments which have grown above your tax-free allowance.

To ensure you make the most of your Capital Gains Allowance, it is generally recommended to sell down a portion of your portfolio to realise the growth made, but only enough to maximise your allowance, is the most prudent strategy.

These funds can then be used to fund any outstanding allowance on your ISA, for example. The advantage of doing so is that by placing your money from a taxable to non-taxable environment you have the potential for further growth, and you benefit in the longer term by potentially reducing a future bill.

There’s plenty of time left before the taxman comes knocking once again, but there’s no better time than the present to start looking into how you can save you and your business thousands of pounds simply through tax allowances you might not have previously been aware of.

 

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HOW TECHNOLOGY IS FUTUREPROOFING STOCK MARKET TRADING

stock market

Tony Shaw, Executive Director, London Office and Head Sales UK & Ireland at the Swiss Stock Exchange

 

Markets are shifting, there’s no doubt. Amid all the disruption and volatility from the past year, the Swiss Stock Exchange asked traders about what they expected in 2020 and beyond in our industry survey. The findings point to a rise in digital to help traders content with external forces.

 

First and foremost, traders are enthusiastic about what digital assets can offer.

Two thirds of traders polled said they’d had a marked rise in interest from their clients for digital assets and crypto-products. Given the interest, traders are increasingly bullish about the potential of these products – so much so that 80% have predicted an increase in overall demand in the long term. Market users believe these assets will help generate cost synergies and streamlining trading and settlement processes by creating efficiencies and ultimately reducing costs.

Our 2019 results reflect what traders have told us when it comes to digital assets and products. Last year, we saw significantly higher trading volumes from products with crypto currencies as underlyings. Overall volumes grew by +8.5% over 2018, but the increase in crypto products alone was +17%, reaching CHF 518.2 million ($534.54 m). There was a year-on-year increase in the number of transactions, as well (+21%): 19,636 trades in total.

The potential digital assets hold is clear – evidenced by the building of the SIX Digital Exchange (SDX), a fully integrated issuance, trading, settlement and custody infrastructure for digital assets.

According to traders, artificial intelligence (AI) is expected to bring further benefits to market operations.

Two thirds of our survey respondents anticipate AI will create more opportunities for the traditional equities business, while a similar number expect it to reduce the cost of trading. Innovation in AI is already – and will continue to be – a key driver in making our industry more effective at withstanding future risks and challenges both within and beyond the market itself.

In Europe, there is growing momentum behind calls for shorter trading hours – this trend was reflected in our survey as well.

Industry groups such as the Investment Association are advocating for stock market trading hours to be cut from 8.5 to 6.5 hours to open the industry to working parents and women who cannot commit to such long workdays. We found traders were largely supportive of this, with many saying that it could even facilitate operational benefits. The roll of AI is clear here in improving efficiency while minimising time wastage: 36% of traders said the introduction of shorter trading hours would prompt greater market liquidity.

Beyond the market itself, geopolitics continue to shape wider market sentiment.

It comes as no surprise that four fifths of traders said their strategies have been – to some extent – influenced by Donald Trump’s tweets. Interestingly, only 39% of those polled viewed Brexit as an influencing factor in trading activity, while three quarters believe the US election will drive trading activity in 2020 and 65% acknowledged trade wars would also have an impact.

More broadly, traders are split on the state of the global economy – 58% are bracing for a global recession while 42% predict stable macro-economic conditions over the next three years. What seems clear is that whatever happens in the wider economy, traders are making headway with new technologies that can improve their strategy, efficiency, and overall market health.

 

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