Adapting traditional financial market ecosystems to new digital delivery protocols is increasing confidence and encouraging change in the financial sector. Despite uncertainties, regulation and inherent aversion to risk, proof-of-concept systems built on blockchain technology – with diverse investment and lifestyle offerings – may lead adoption and increase investor confidence.
New technologies aren’t readily adopted. This is no exception in digital or financial sectors. Engineers initiated TCP/IP protocols, the basis for what we know as the world-wide-web today, in the early 1970s. What is now ubiquitous didn’t appear overnight. The technology required testing, the applications had to align, and investment had to occur. Old methods had to be acknowledged. The proof of concept needed application. Once advertisers and corporations -the investors and proponents of the old methods- found the inherent value, the internet advanced, and continues to move, with alarming speed. It took time. It took innovation. And it took wisdom.
Vj Angelo has more than 35 years of experience in the finance sector. He has that wisdom gleaned from decades of financial expertise. Vj has recently moved into blockchain and crypto indexing and, with his partners, has launched a decentralised digital wealth ecosystem, Inspira Digital Wealth Club, a bellwether of change in the adoption of new financial technologies.
Smart Contract and blockchain technologies are being adopted at large, around the globe. Since the inception of blockchain technologies in 2008, with bitcoin transactions, there have been advances and some significant returns, but these have been limited in scope and fraught with contention and risk. While the rate of adoption may be faster than we saw with internet and IP protocols, the acceptance for financial institutions of the viability of decentralised systems, cryptocurrencies, tokens and smart contracts, as facilitated by blockchain technologies, still has some way to go. The potential exists, according to Vj, his team and their investors, but the technology remains beyond the realm of possibility for institutional investors and the financial sector at large.
It’s been more than a dozen years since we saw the first blockchain instance proposed for bitcoin. Considering Moore’s Law and other theories of computing and technology, this is a lifetime. Given the cultural context, and the nature of financial services around the world today, why is it taking so long for our financial systems to wholly adopt blockchain technologies? What can be done to change this?
Oversight, regulation and traditional methods of doing business in finance, have led to slow adaptation and even slower adoption. Traditional financial systems and old, centralised data models are cumbersome, at best. With over reliance on antiquated, over-taxed centralised systems, the financial sector is unable to keep ready pace with the speed of investment. The problem is only getting worse. Something as basic as the liquidation of assets has been likened to moving mountains. Institutional systems don’t allow for ready adoption of new technologies. The fear of investment risk or security issues stifle progress. We are now at a critical juncture with financial technology.
According to Vj, what’s needed is a clear proof-of-concept and ready solutions to current problems facing the fintech sector. Blockchain is a buzzword, and crypto currency is a new, hot thing, but the volatility of crypto markets, privacy concerns and the inherent transparency of such technologies gives pause to all but the most radical investors, stifling real progress in financial services.
Wider adoption may well be through rectifying existing, traditional financial models, with the speed, security and data potential of blockchain resources. New fintech models, like the Inspira Digital Wealth Club, are providing this proof-of-concept and finding ways to manage change in financial markets whilst offering on-chain digital solutions which address pressing financial and security needs. A middle ground, understanding and leveraging “old methods” of management and finance with new technologies opens up entirely new avenues of wealth management, investment and wealth generation. This will provide countless opportunities for experienced and novice investors alike.
Inspira Digital Wealth Club acknowledges these old models, finds the middle ground and provides incredible opportunities to investors, from new to experienced managers. Combining the wisdom of an older, tested business mindset, embracing diversification, and laying this over a new, transparent and inherently faster decentralised framework could assuage potential concerns for experienced investors. This may also motivate younger, innovative yet untested investors and early-adopters to explore opportunities. With a comprehensive financial ecosystem, focusing on lifestyle in the context of wealth management and offering this as a differentiator – a game-changing perspective in the world of digital finance – Inspira is on the cusp of meaningful institutional change and a digital financial revolution.
The key to all of this, according to Vj, is the smart contract. Enabling tokens which do more than register asset ownership is the critical component to keeping corporate actions on-chain. This is an innovative solution, a 360 degree approach that is more than just a blockchain transfer of asset ownership. Inspira is changing the way investors think by offering them the diversity they need in a single platform. They provide a range of investment funds, advisory services and luxury lifestyle products, on-chain, with the ability to generate tradable tokens to reinforce the lifestyle.
With old infrastructure, cumbersome investment systems and sluggish regulatory frameworks, global finance is ripe for new players, innovators and forward thinkers. This will leave old financial institutions, reliant on antiquated, centralised systems scrambling to catch up. And, while the value of regulatory systems is evident, with regulators intent on keeping us all safe from financial misdoings, the transparency of blockchain transactions and smart contracts mitigate much of the concerns for financial regulators. Indexing does much the same for the volatility of the crypto market. This is the wisdom in the innovation, the decades of traditional financial expertise embracing new, smart and transparent technologies.
Inspira Digital Wealth Club has high aspirations. Inviting innovative investors and moving the blockchain from an isolated crypto-focused mindset, Inspira hopes to change the nature of digital finance, ushering in a new era of innovation, sensibility and usability. By acknowledging old systems, proving solutions to inherent problems and testing comprehensive offerings in the market, Inspira Digital Wealth Club is paving the way for future innovation in fintech. Investors get a mitigated sense of what’s possible, the unbidden control of their own investment portfolio across a range of services, and investment assets they can actually enjoy. It’s a coupling of financial success and lifestyle focus and, perhaps, the dawn of a new age in investment technology.
Vj Angelo has worked in finance and investment for over 35 years, with experience in fixed income, listed derivatives, exchange market infrastructure, regulation and capital raising. After moving into Digital Technology and products in 2018 he founded LDX Asset Management and Inspira Digital Wealth in 2020. – the world’s first Defi 2.0 Wealth Management Club.
The Evolution and Challenges of Crypto Regulation
Cryptocurrency regulations are evolving quickly around the globe with authorities responding to developing risks professed by criminals exploiting the latest payment methods to mask and launder the profits from their crimes.
According to William Je Founder & CEO, Hamilton Investment Management Ltd, this has warranted the introduction of a more stringent level of due diligence by additional bodies to introduce preventative measures.
William Je Founder & CEO, Hamilton Investment Management Ltd explains: “The past ten years has seen several structural changes in Know Your Customer (KYC) and anti-money laundering (AML) regulations in both Europe and across the world. High-profile money laundering cases and the penetration of illegal monies into global markets have caught the attention of regulators.
“As regulators improve their understanding of these criminal practices, AML requirements have also been improved. However, these improvements have been a reactive process.”
To address the challenges of the blockchain ecosystem, the European Union has started to introduce financial regulations that further bolster the regulatory system in order to improve licensing models. Many member states are regulating crypto assets individually, and Germany is leading the way in being the first to regulate.
Je continues: “These national driven regulations clearly point to a future pathway for crypto companies, outlining the requirements for obtaining and maintaining a financial license from the regulator.
“Compliance, however, is to my mind essential as it not only boosts investor confidence but adds a necessary layer of protection to investors.”
As crypto evolves, so have regulatory bodies’ efforts to monitor, address and enforce restrictions. The most prominent is the Financial Action Task Force (FATF), which details guidance and determines best practices in anti-money-laundering practices and combating the financing of terrorism.
FATF Recommendations number 16, better known as the ‘travel rule’, which requires businesses to collect and store the personal data of the originators and the beneficiaries in blockchain transactions, is the most notable.
Je concludes: “What does this mean? In theory, access to this data will enable authorities to have better oversight and enforcement of crypto market regulations. In other words, they’ll know exactly who is doing exactly what.
As we have always argued – transparency is key. We need to regulate crypto as an asset class with efficacy, which necessitates legislation that is applicable specifically to digital assets and does not hinder the market.
The criminal financial trade which arguably encompasses money laundering, illegal weapons sales, human trafficking, is also international. Thus, cracking down on it is, out of necessity, an international effort.
The decentralised nature of blockchain, which runs contrary to the central-server standard we know and use nearly everywhere, presents a formidable challenge here. Rules and regulations for traditional financial institutions are being implemented wholescale into the crypto sector. We believe that this is arguably wrong footed as it ignores the innovation and uniqueness this asset class and its underlying technology entails.
Traditional forms of regulation from the fiat world do not reciprocally apply to every aspect of crypto nor to the fundamental nature of blockchain technology. However well-intentioned they may be, because these imposed regulations are built on an old system, they must be adapted and modified.”
How bug bounty programs can help financial institutions be more secure
Rodolphe Harand, Managing Director at YesWeHack
Financial services have been one of the most heavily targeted industries by cybercriminals for several years. One alarming stat from the Boston Consulting Group found these firms to be 300x as likely as other companies to be targeted by cyberattacks.
Furthermore, the pandemic has led to a significant increase in the number of cyberattacks targeting financial institutions (FIs), with around 74% experiencing a spike in threats linked to COVID-19.
With FIs holding some of the largest collections of sensitive and private data, it’s clear they will remain an attractive target for malicious actors, especially as any data stolen can be used for fraudulent activities. This leads to the reputational damage of the financial entity that was compromised and has a knock-on effect in terms of monetary and reputational damage to affected customers.
For CISOs at FIs, the conundrum faced is how do you protect intellectual and customer data, and ensure accountability and transparency for clients and stakeholders, at a time when the pandemic has created budget constraints. Research from BAE Systems found that last year alone, IT security, cybercrime as well as fraud and risk departments had their budgets cut by a third.
Below we look at how bug bounty programs can help to address these pressing issues.
Protecting valuable data
Protecting customer and intellectual data has always been a top priority for FIs. However, as opportunistic cybercriminals have a lot to gain by stealing this valuable data, there is a constant evolution of threats, which means FIs must stay on their toes. By deploying a bug bounty program, FIs can work with ethical hackers that have a wealth of experience and unique skills when it comes to identifying security weaknesses within a FI’s defence, thus helping to implement effective security measures to help prevent data breaches.
Building trust among various stakeholders such as customers, suppliers and investors is critical for achieving business goals. By deploying a bug bounty program, FIs send out a message that they care about protecting the security of the data of those they work with – which in turn can have a cascading effect resulting in better business performance.
For FIs to win customers and keep them happy, amidst the growing threat of neo banks and customer-centric fintech organisations, speed of innovation is crucial. As such, many FIs have adopted an agile approach to build, test, and release software faster to bring online and mobile banking solutions to market quicker. However, this can create frictions between development and security teams. Security mandates are deemed to be unnecessarily intrusive and a cause of delayed application development and deployment.
Yet, with DevOps teams needing to build and deploy applications faster than ever before, an epidemic of insecure applications has emerged. According to Osterman Research, 81% of developers admit to knowingly releasing vulnerable applications, while research from WhiteSource found 73% of developers are forced to cut corners and sacrifice security over speed.
With developers often not having the time, tools, skills, or motivation to write impeccably secure code, there is an evident need to provide developers with more support when it comes to building applications securely Fortunately, bug bounty programs can provide a “fact-based” financial implication of inherent security flaws within the process. This makes it possible to hold development teams and service providers accountable for creating or delivering insecure products, thus addressing inherent security gaps within the business units and helping to drive continuous improvement.
Moreover, security awareness and education of developments teams can be improved significantly for those developers that are directly involved with the management of vulnerability reports for their bug bounty programs. This is because, the mere fact of exchanging information with ethical hackers, or assimilating the thinking of a potential hacker and having proof of concepts of vulnerability exploitation on their application components, naturally accelerates consideration of security early in the development stage and provides ongoing learning.
Get more return on your investment
According to Gartner, 30% of CISOs effectiveness will be directly measured on their ability to create value for the business. When security budgets are challenged, CISOs need to demonstrate business value through initiatives designed to enhance efficiency whilst stretching the dollar.
This is where bug bounties can help tremendously. Compared to conventional penetration testing, bug bounty offers a fast, complete, and measurable return on your security investment, with businesses only paying out for successful discovery of vulnerabilities. Equally, businesses get access to hundreds of ethical hackers that can test their programs, each with their own unique skillsets as opposed to only one skilled researcher testing the network. This results-driven model ensures you pay for the vulnerabilities that pose a threat to your organisation and not for the time or effort it took to find them.
Bug bounty programs also deliver rapid vulnerability discovery across multiple attack surfaces. With this approach, organisations receive prioritised vulnerabilities and real-time remediation advice throughout the process to accelerate the discovery of, and solution to vulnerabilities.
Another appeal of bug bounties is that due to the continuous nature of testing, more vulnerabilities are found over time as opposed to pen-testing. This is key to financial institutions that require agility to keep up with the continuous roll-out and updates of applications.
The cornerstone to a successful security programme
The risk posed to financial institutions by cyber threats will only continue, as evidenced by the number of data breaches seen in recent times. The COVID-19 pandemic has only exacerbated these risks, especially with almost all FIs having needed to shift to a remote working environment – which has only widened the attack landscape.
For FIs, a bug bounty program should be considered a fundamental cornerstone of any security strategy, with it being a modern-day cybersecurity solution that is well-equipped to tackle the immediate security challenges they face. In doing so, FIs will not only prove to customers and stakeholders their commitment to data protection and security but this will also be help them to avoid the monetary damages that could be imposed by regulators if a breach was to take place.
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