Timely, comprehensive, professional and accurate information and data to understand the latest information about blockchain, cryptocurrency and Bitcoin

FameEX Hot Topics | BIS Recommends Advanced Planning for Central Bank Digital Currency Security

2023-11-30 16:41:00

Central banks planning to issue a central bank digital currency (CBDC) must prioritize security from the outset, according to a report from the Bank for International Settlements (BIS) on November 29. The report emphasizes the need for an integrated risk-management framework starting at the research stage and advocates for security to be an integral part of CBDC design.

The risks associated with CBDCs can vary based on a country's specific conditions and goals, and they evolve over time, necessitating ongoing management. These risks can be categorized into different groups, with various individual factors contributing to them. The scale and complexity of a CBDC project can increase these risks. One critical risk factor is the potential gaps in the internal capabilities and skills of central banks. While many CBDC-related activities can be outsourced, it's essential to have the capacity to select and supervise vendors adequately. Operating risks can also arise from human errors, inadequate definitions, or incomplete planning.

The report highlights the cybersecurity challenges that CBDCs may face, including threats from other countries, hackers, users, vendors, or insiders. It identifies 37 potential "cybersecurity threat events" stemming from eight specific risks. Additionally, the unfamiliarity of distributed ledger technology to central banks may lead to inadequate vetting or overdependence on third parties.

Despite the limited real-world use of CBDCs to date, there have been instances of risk management failures. For example, China faced unexpected data storage requirements after launching its digital yuan pilot. The Eastern Caribbean Central Bank's DCash, a live CBDC, experienced a two-month outage in early 2022 due to an expired certificate in the software.

However, the study also noted that the DCash pilot project had been significantly expanded the previous year to provide support in Saint Vincent and the Grenadines following a volcanic eruption. This expansion improved the currency's resilience.

In conclusion, the BIS report underscores the importance of comprehensive risk management and security considerations in the development and implementation of CBDCs. It emphasizes that central banks must continuously assess and adapt to evolving risks to ensure the successful and secure deployment of digital currencies.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.

Copyright © 2022-2023 FAMEEX.COM All Rights Reserved
FameEX APPMobile trading, anytime, anywhere