Trying to cover what 2020 has in store for artificial intelligence, blockchain, crypto, data, and enterprise trends in one column was exceedingly ambitious. Looking at the remaining topics of crypto, data, and the enterprise, regulation, or the lack of it, will have a significant impact on crypto and data while the Trump Administration’s Middle East adventurism has reordered enterprise priorities.
Libra will not have a good 2020. Facebook completely underestimated the push back that it would receive from central banks, market regulators, and legislators. The company announced the project too soon, too loudly, and with too few details, which only spurred the fear of Libra critics. It is a shame because Libra’s operational model is solid. It might have worked if it was not for one of the FANGs bringing it to market.
As for crypto assets, the Securities and Exchange Commission likely will not change its position of exchange-traded funds based on bitcoin or cryptocurrencies. It drew its line in the sand when it said that proposed ETFs must have underlying markets that are not susceptible to manipulation. Given that the raison d’etre of cryptocurrencies is to avoid intermediaries and their rules, reconciliation between the two will be nigh impossible.
On the positive side, the SEC has shown its willingness to approve unlisted closed-end funds for qualified investors. Galaxy Digital, Van Eck, and most recently Stone Ridge already received the SEC’s approval of their funds in 2019.
Illiquid tokenized assets will also gain traction in the next 12 months, but it will not be because of their tokenized nature. Institutional investors are far more interested in the assets and their returns rather than their changes to middle- and back-office operations. Until more issuers release assets that are not sized for proofs-of-concept, tokenized-asset adoption will remain light.
The wild west days of alternative data are nearing their end as more privacy regulations go into effect. The California Consumer Privacy Act, which went into effect on January 1, brought many similar rights that EU citizens have under the General Data Protection Regulation to Golden State citizens.
Californians have the right to know what of their personally identifiable information a company that does business with them collects, to access as it and request its deletion, as well as to know whether the company sells their data to third parties and opt-out of such sales.
Firms face major challenges in making sure that they abide by the new regulation with their own data, but it puts even more pressure on knowing the provenance of any alternative data that they acquire from third-party provides.
Alternative data providers may face new regulations on how they acquire their data as well. Throughout two hearings by the House Financial Services’ technology and artificial intelligence task forces late last year regarding privacy, Representatives heard a constant refrain: “Screen scraping is bad and collecting data via APIs is good.”
It is an over-simplification of the issue, but it is a catchy little mantra that the average politician can remember until they address privacy concerns in a non-election year.
Continued outsourcing of non-core specialties was going to be the top trend for the enterprise this year, but cybersecurity quickly supplanted it due to Qasem Soleimani’s death.
What few rules of engagement there were in cyberspace is likely history as Iran looks to harry and hamstring its opponents using one of its favorite weapons, state-sponsored cyber-attacks.
Firms can expect the intensity and complexity of such attacks to grow significantly throughout the year. Hopefully, everyone is prepared for the onslaught.
All in all, 2020 is proving to be a very interesting year for fintech from its start, and IntelAlley will cover all of it throughout the year.