Ripple’s CBDC Innovate 2023: AnChain.AI’s Impact on Digital Asset Security and Compliance – Futurum Tech Webcast

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Transcript:

Steven Dickens: Hello and welcome. My name’s Steven Dickens and you’re joining us here on Futurum Tech Webcast. We’re coming to you to talk about Ripple and their CBDC Innovate 2023 competition participants. I’m joined by Francesco Piccoli from AnChain. Hey, Francesco, welcome to the show.

Francesco Piccoli: Thank you. Hey, Steven. Thank you for having me.

Steven Dickens: So let’s do some introductions first before we dive in. What’s your role and what do you do for AnChain?

Francesco Piccoli: Yeah, I am a Senior Director at AnChain. I lead the product development effort at the team, and I’ve been here for around three years and a half.

Steven Dickens: Fantastic, exciting times to be in this space for sure.

Francesco Piccoli: It is indeed.

Steven Dickens: So let’s get the listeners and viewers orientated first. Tell us a little bit about AnChain and what you guys do.

Francesco Piccoli: Yeah, so AnChain is a security and risk management company based out of the San Francisco Bay Area. We provide products and services to three different buckets, starting from crypto native companies all the way to financial institutions and enterprises and governments from regulators and law enforcement. Specifically we provide services and products around compliance and security. And to be more specific, we have a suite of products that are used by these three buckets for either anti-money laundering purposes, or to protect these, well, these companies’ customers from hackers or bad actors in the space and investigate when money is actually stolen and is moved around all the way to points of diminish. So we help in the entire life lifecycle of protecting digital assets and customers of company that provide digital assets, services and products. We help them monitor it and we help recover when bad things unfortunately happen.

Steven Dickens: So Francesco, tell us a little bit about how you found out about CBDC innovate and your workings with the Ripple team and their CBDC platform.

Francesco Piccoli: Yeah, so we’ve been working in the XRP Ledger ecosystem for around two years now. We built several products on XRPL and we know a lot of different ecosystem players including Ripple, and I believe it was at the Apex Developer Conference that happened in Amsterdam a couple of month ago that I heard about the Ripple CBDC Innovate Hackathon. Actually not true. I heard about it before. I heard it this summer from one of my contacts at Ripple, and we decided to participate because this is a very promising area of digital assets. There’s a lot of research and development being done around CBDCs, Central Bank Digital Currencies, and as part of that development effort, there can only be actual deployment in production and real work use cases if there’s anti-money laundering and risk management practices and procedures and tools around it. So we decided to participate in bringing those best practices and tools to the industry.

Steven Dickens: So from the pre-read materials and looking at the solution, you guys focus in on that analytics space for governments and for organizations. Tell me a little bit about how the AnChain solution does that with regard to the Ripple CBDC platform.

Francesco Piccoli: Absolutely, and you’re absolutely right. We provide… We’re basically an analytic layer on top of the XRP Ledger and on top of any blockchain protocol. So we ingest a lot of the raw blockchain data and we have several AI algorithms that we developed in-house that help us make sense of that data and help our customers make sense of that data. So specifically there is very specific use cases that these can be used for. In our case, we provide data that facilitates all the anti-money laundering practices that certain companies need to apply internally because of regulation.

So if a company is launching a digital asset, they need to make sure they’re not transacting with a sanctioned individual or they’re not transacting with a hacker wallet. And same goes on the government side. Well, it’ll be differently, but on the government there’s regulators and there’s law enforcements that we work with. Law enforcement agency, it’s pretty straightforward. There’s a hack, there’s misbehaviors, there’s suspicious behaviors. They need to investigate these sort of behaviors and ideally bring it to court and build cases.

So we give them an analytics tool to actually look at these bad behaviors and for example, a customer loses money due to a hack and we give law enforcement agencies or across the world a tool to go and investigate where this money’s going and ideally get the source of liquidations such as exchanges and collaborate to actually get that money back. We also help on any regulatory effort, of course needs to be backed by strong analytics. So we provide strong analytics around digital assets and smart contract and CBDC as part of this effort to regulators to help regulate the market and make sense of it.

Steven Dickens: You mentioned AI, obviously a hot topic right now. Can you just double click on some of those algorithms and how you’re applying AI to augment that AnChain solution and what you’re doing with the CBDC platform from Ripple?

Francesco Piccoli: Yeah, that’s a great question. On the very high level, we live in the era of data and big data specifically, and blockchain data is massive. There’s a lot of raw data that is generated every second on the blockchain that is very hard to make sense of. So we use AI as a tool to help ourselves and our customers actually make sense of that data. That translates into different use cases. On one end, for example, we providing AI generated risk score to entities and wallets on the blockchain based on their chain behavior. You can imagine there’s millions, millions of wallets out there transacting millions of entities. If you were to actually manually screen those entities and manually try to go and find their behavior, that would be an impossible job. You would need so many people to do that.

So we have a patent for AI algorithm that we developed to actually rescore these wallets and entity on the blockchain. So that’s one area where we use AI. Another one is around understanding code that is deployed on the blockchain. To give an idea on… If you’re familiar with the concept of smart contracts, that’s code. Those are pieces of code that are deployed on the blockchain with certain instructions that are run by themselves. That pieces of code sometimes is very hard to understand, especially for non blockchain developers who need to understand what’s going on in the market. So we provide plain english explanations as well as explanation of potential vulnerabilities in that pieces of code through LLMs, large language models. So we integrated, for example, with open AI, GPT-4 to make sense of those lines of code.

Another use case that we have internally is around investigations. So I’ll go brief on this, but a lot of the investigations that happened in the past 10 years for some of the biggest hacks or butchering cases and fraud in general has been manual, meaning that an investigator would have a case, well, would need to find a case or would have a case coming into their plate, and they would need to manually go and investigate those cases by clicking on blockchain explorers or blockchain investigation tools, hundreds of signs to find all the relevant parties involved. It’s a very manual job and time-consuming at the same time, and certain investigations would take weeks to actually unfold. We develop an AI tool that automatically traces that money for an investigator and allows investigators to complete entire investigations in the span of seconds. So that’s been a big innovation in the space and it’s been saving a lot of headaches to investigators in the private and public sector that now can focus on jobs that are less tedious and less manual.

Steven Dickens: That makes perfect sense. That leads onto my final question, which is around security. I know from our conversations and that some of the pre-read material I’ve had from the Ripple team. AnChain has been working with government agencies, particularly in the security space. So what have you been doing to bring AI and particularly into that security space with the Ripple CBDC platform?

Francesco Piccoli: That’s a great question and that’s one of our biggest priorities right now, and it’s a topic that we’re spending a lot of time and energy and resources on. Basically the entire digital asset. Web3 space has not reached a good security posture yet. Its security maturity is… It’s not up to par to the traditional software industry. And we’ve seen these in the past year really with all the hacks that happened around $4 billion were stolen in blockchain related hacks. Unfortunately, that is not a great incentive for institutions to actually jump in the space and launch products and services in the space, especially for the sake of this discussion. For a central bank rating that $4 billion have been stolen in the past year due to hacks is going to push any CBDC effort back, unfortunately paying back.

Steven Dickens: Yeah, it’s going to make people reluctant to adopt technology because there’s still this concern that we see in the market. So where is AnChain.AI in that space and how are you addressing some of that, I don’t want to say reluctance because I don’t think it’s reluctance, but some of that caution that may be exists in the marketplace?

Francesco Piccoli: So this is exactly where we come in. We’re trying to bring best practices from the traditional cybersecurity world applied to in traditional software industry to Web3 as well.
There’s very clear standards and recommendations from institutions out there on frameworks around cybersecurity and what companies should adopt to secure their critical infrastructure. So the most famous one is probably the NIST, N-I-S-T Cybersecurity Framework, the National Institute of Standard and Technology Cybersecurity Framework, which has five steps that companies and entities should take to secure their software infrastructure. Those five steps are not fully developed by companies that are building in the blockchain world. So those steps go from identifying vulnerabilities to protecting those vulnerabilities, monitoring and detecting potential attacks, recovering, responding. There’s multiple clear steps that are outlined out there. Unfortunately there’s no tools and yet education in the Web3 space for that. So all of our products fit into that framework.

Can we help company identify vulnerabilities? Can we help and governing institutions in this case like central banks before they go and launch any product and service? Can we help them identify potential vulnerabilities? Can we help them patch those vulnerabilities? Can we help them set up monitoring tools and procedures for them to be aware of their critical infrastructure? And this is where, for example, CBDC secure comes in. Can we help them have a full view of their critical infrastructure and the digital asset that they release their CBDC? Then can we help them respond to potential threats. If there’s an attack from hackers, how would Central Banks respond? What is their response plan? And finally, if some money is actually stolen or the service goes down, can we help them either recover the money by help them investigate using our analytics tool, or can we help them recover their infrastructure and then get their product and services back up? So CBDC Secure is a big data analytics platform that allows CBDC issuers to actually have a full view around their anti-money laundering and risk management for the Central Bank digital currency that they released.

Steven Dickens: From all the discussions I’ve had and all of our research in this space, I think that’s absolutely crucial. I think that’s scope and the breadth of what you’re doing and certainly bringing AI to that with what we’re hearing and what we’re seeing makes perfect sense to me. So Francesco, really appreciate the conversation. Thank you very much for your time today. Really enjoyed having you on the show.

Francesco Piccoli: Thank you, Steven. Appreciate you guys having me here.

Steven Dickens: You’ve been listening to the Futurum Tech Webcast. I’m Steven Dickens, your host. Please click and subscribe and do all those things to help with the algorithm and we’ll see you next time. Thank you very much for watching.

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