2023-The Year in Digital Wealth, Part 2

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We wish everyone a Happy New Year!  To review Part 1 of our 2023 year in review in digital wealth. click here.  Now onto Part 2 of our year in review, with a look at where 2024 may be headed.

It’s your week (and year) in digital wealth!


Key Government Agency Moves

For the most part, the American Government at all levels allowed the private players to do their thing. However, deft moves, policies, and regulatory actions guided the industry in 2023. Here are a few of them.

The Department of the Treasury

The premier finance agency was quite busy in 2023. However, they operated far more quietly than others in the background. A February Treasury report identified reduced risk management capabilities because of information gaps from Cloud Service Providers (CSPs).

According to the report, human capital and tool gaps were some challenges FIs faced when deploying cloud infrastructure.

Additionally, the Treasury launched the Cloud Executive Steering Group (CESG) in collaboration with key private sector players in May. In April, the Treasury identified North Korea as an actor in noncompliant DeFi projects.

In October, the Treasury selected J.P. Morgan for account validation services.

The Securities and Exchange Commission (SEC)

Despite focusing on the crypto space, the banking and financial sectors had their fair share of the regulator looking for improper transactions, trading, and messages.

Additionally, in early February, the SEC reduced the stock settlement timeframe to 24 hours from the previous 48 hours. Private sector players appealed to the SEC in March over proposed rule changes.

In May, the regulator proposed amendments to trading rules to reduce and mitigate similar “gamestop” scenarios. According to the rules, covered clearing agencies (CCAs) must make as many intraday margin calls as possible after careful market observations.

Also, in July, the SEC proposed new rules that addressed conflicts of interest in AI training models. Firms now have to eliminate rogue behavior when discovered.

The Managed Funds Association (MFA) and 15 other industry groups requested a 15-day reprieve for the public comment deadline per the proposals in late August.

Additionally, the regulator approved the inclusion of the IntelligentCross ATS (Alternative Trading System) in the FINRA Alternative Display Facility (ADF) and ordered FINRA to create a single national market system (NMS) plan in September.

In a plot twist, Gary Gensler, the SE Chairman, indicated that the regulator had deployed AI tools for market surveillance at a Senate oversight hearing.

Investigations into improper communications continued till the end of the year, with the regulator sending requests for information to investment advisors over their usage of AI tools in December.

The Commodity Futures Trading Commission (CFTC)

The CFTC was active in its enforcement actions but had a positive outlook on digital assets. Everything continued as usual for other industry sectors. In April, the CFTC ordered Goldman Sachs to pay $15 million in fines over violating swap dealer business standards between 2015 and 2016.

Consumer Financial Protection Bureau (CFPB)

The end-user was in focus at the CFPB, with several studies and surveys providing insight into the issues consumers face. A March survey highlighted credit card interest rates between 19% and 23% for payments alongside credit scores of 580-669.

In June, the CFPB noted higher risks associated with using payment apps for daily transactions. FinTech deposit and liability insurance is still an issue. Additionally, the agency highlighted consumer issues when using chatbots, including federal consumer legal protection issues, information, reduced consumer satisfaction, and others.

In October, the CFPB proposed new rules that allow free data exchange per consumer protections. Additionally, the CFPB proposed amendments that put nonbanks and FIs side-by-side per privacy issues and consumer rights. The regulator targeted FinTech firms with the measure.

Studies and Insights

The following studies and insights provide a window into what the new year may look like.

J.P. Morgan/QC Ware

An April J.P. Morgan-QC Ware study identified the several benefits quantum computing processes offer the industry, including improved hedging odds and strategies via an AI-driven process (quantum deep learning).

Consequently, quantum computing is still nascent but could exponentially change the industry with breakthroughs.

J.D. Power

The 2023 “J.D. Power U.S. Consumer POS Payment Program” (published in September) identified increased consumer shifts towards digital payments, with debit cards (at 78%) taking the lead alongside cash (at 74%). Additionally, the study identified six consumer personas per Point-of-Sale (PoS) market segmentation.

Unique Product Launches and Partnerships

Several private institutions made a few moves that will give the industry areas of focus this year. They may be few, but they are not far between. Here they are.

Deloitte/Marqeta

In February, Deloitte partnered with Marqeta, the card issuer, to provide payment services for Deloitte clients. The collaboration also enabled parallel activities in tandem with the Marqeta ecosystem.

Novata/Global Impact Investing Network (GIIN)

Things were pretty interesting per ESG issues with a new standard on the Novata platform (the GIIN IRIS+). The tool enables accurate decisions in the impact investing niche, powered by GIIN, an industry nonprofit.

The 2024 Verdict

  • We believe 2024 will be pivotal per exponential growth.
  • Geopolitical factors and the 2024 presidential race will be critical (depending on who wins) in policy directions.
  • Still, there will be many innovative solutions in 2024, which is what America is known for.  Now onto the new year!