NEWSLETTER 2.0
FEBRUARY 23, 2024
The European Union (EU) has adopted a new regulation that aims to protect its various institutions from cyberattacks by creating a common standard of cybersecurity called the Cyber Resilience Act. The Act aims to improve the level of cybersecurity for digital products for consumers and businesses across the EU. The establishment process for this regulation began in 2021 when the EU Council stressed the importance of a robust security framework to protect itself, and an agreement on terms was reached at the end of 2023. The law will require companies to alter aspects of how they test their security systems and report cybersecurity attacks to regulators to ensure safer technical processes. Under the new regulations, financial firms need to fully address any weaknesses they can find in the security tests of their critical systems. Larger companies need to carry out more advanced penetration tests every three years, including tests of any tech services that are outsourced to third parties. The legislation also aims to ensure that consumers are fully aware of their security rights around the devices they purchase. To enforce this, EU entities are trying to raise their security standards. The regulation will also set up the Interinstitutional Cybersecurity Board (IICB), which will monitor and support the regulation’s implementation. However, there are some intended pressures put on companies with that act as well. Hardware and software companies will have a 36-month period to adapt to the new legislation once it’s passed. It’s intended to be enforced twenty days after its publication. Companies that don’t follow regulations may be fined and have their products removed from EU circulations. Realistically, most financial institutions already have established processes for managing their cybersecurity risks from their immediate technology suppliers, but they might not have the same level of oversight over the vendors that work with their suppliers, say to the third or fourth party. This Act could prove useful for further improving technological security throughout the EU.
Cybersecurity Resilience Act
By: CJ Dwumfuioh
Citi Tokenization of Private Market
By: Luke Meyer
Citi's tokenization of private markets refers to the process by which Citi, one of the world's largest financial institutions, collaborates with Wellington Management to utilize blockchain technology in tokenizing assets within the private markets. Private markets encompass assets not publicly traded on the stock exchange, including private equity, real estate, and other alternative investments. A token represents ownership or a share in the underlying asset within the private market. Tokenization involves converting rights to an asset into a digital token on a blockchain, making it easier to trade and transfer the rights to the asset. For Citi's purposes, they act as a custodian for transactions, facilitate insurance and trading, and offer advisory services for clients seeking to tokenize their assets. This approach enhances the fluidity and accessibility of trading and ownership in the private market, expanding investment opportunities to a broader range of investors. Moreover, through the tokenization of assets, transaction fees are reduced by eliminating intermediaries and enabling fractional ownership through the division of assets into smaller, more tradable units. This stimulates investments and transactions within the private market. In summary, this represents a progressive step for private markets, encouraging more investors to explore this market. While the mechanisms suggest potential cost savings, it's crucial to note that the extent of fee reduction will depend on various factors, including the specific implementation of tokenization, regulatory requirements, and market dynamics.
Cashapp Savings Account and How It’s Different
By: Dylan Rudd
Recently, the prominent financial services platform Cash App unveiled its latest offering, the Cash App Savings Account feature, sparking a new trend in the peer-to-peer mobile payment app market, which includes companies such as Zelle and Venmo, among others. This innovative feature allows Cash App users to earn interest on their in-app balances, providing a lucrative opportunity to grow their wealth without worrying about withdrawing money from the app into their bank. Cash App Savings represents a significant milestone for the platform and the entire mobile payment market, expanding its range of services. By offering a no-fee savings account option and providing a substantial 4.5% interest rate, Cash App distinguishes itself from the competition. Platforms such as Zelle and Venmo do not offer such accounts, making users less likely to store large amounts of money in these platforms, as they would not be earning any interest, and inflation could slowly decrease the value of their money. This move allows Cash App to emerge as a leading figure in the realm of financial technology, reshaping how individuals manage and grow their money through these platforms. Currently, it is uncommon for individuals to store money in financial platforms not tied to well-established banks; however, this new step by Cash App may revolutionize the way we view online banking. Furthermore, according to MarketWatch, “The national average savings account interest rate was 0.47% as of Jan. 31, 2024.” Not only is the new Cash App Savings account revolutionizing its market, but it is also making a statement and competing with traditional banking platforms that may offer similar, if not lower, interest rates than Cash App.