Peter Howitt

Blockchain is not a panacea for all human misbehaviour. Any mechanisms for consensus between parties must be structured using a robust game theoretic framework that starts from the assumption that bad agents will try to game the system. Algorithms are just recipes to do something. No one has yet improved on Satoshi's proof of work model, which is not simply algorithmic, that is based on making the cost of trying to game the system prohibitively technologically difficult and expensive. Any ultra robust consensus framework must deal with moral hazard issues using a mixture of technology, economics and game theory.

PSD2 regulates most operators and activities within the banking, payments and electronic money sectors. It is European-wide (even though the UK is no longer within the EU it is the same framework applied to UK and Gibraltar PSPs). It can even apply to non-European PSPs if they have sufficient nexus within the EU. It matters because it provides many consumer-focused protections and features in addition to enabling open banking data flows and a high level of payment security. Consumer protection is at the heart of the regime and some of the strongest provisions are in relation to limiting liability for unauthorised transactions. The requirements relating to safeguarding of customer funds are also essential to understand for any PSPs.

– Do a few introductory courses on AI such as Google Research's free Generative AI course: https://www.cloudskillsboost.google/paths/118 – Read accessible books such as "Artificial Intelligence" by Melanie Mitchell. – Listen to interesting podcasts such as Mo Gawdat & Steven Bartlett https://open.spotify.com/episode/4xVz9V5DksIPqrdArBPDcb?si=vHtTnP4uSlyYret7acKRSg. – Watch the inspiring Go film: (in my current playlist of interesting AI YouTube videos: https://www.youtube.com/playlist?list=PL4Esu0IqtgucptMohrwW5e5-sYIfyN0fp) – think about what AI is not currently doing well (e.g. abstraction, transferable knowledge & skills) – Read Turing's paper ("Computing Machinery and Intelligence" –https://doi.org/10.1093%2Fmind%2FLIX.236.433)

The extraordinary complexity of regulation, the size and importance of financial markets, the closeness to regulators and the strength of the vested interests within the financial instruments markets mean that blockchain solutions are likely to primarily be developed by incumbent players for efficiency purposes (e.g. J P Morgan). I am not holding my breath for a decentralised blockchain revolution in this space!

ESMA's findings on a DLT Pilot regime (ESMA70-460-111 2022) reference: – Transparency: due to the public nature of blockchain ledgers allowing for tracing of transactions throughout the life cycle of the security and as a register of ownership. - Data integrity: consensus among participants makes it more difficult to change the truth state of the system – Disintermediation: direct access to secondary markets, peer-to-peer models, disintermediation reducing costs and counterparty risks. – Efficiency: improved efficiency for listing, trading and settlement due to decentralisation, improved access to information, real-time execution of transactions, and ease of exercising contractual rights, processing payments and transferring funds.