Countries Must Establish Clear Legal Frameworks for CBDC Implementation, Says BIS Head
Countries need to establish clear legal frameworks to facilitate the implementation of central bank digital currencies (CBDCs), according to Agustín Carstens, the General Manager of the Bank for International Settlements (BIS). During a recent conference in Basel, Carstens emphasized the importance of updating laws for digital currency technology. He stated that national laws should allow central banks to issue CBDCs in order to meet public demand. Currently, most countries either prohibit or have ambiguous rules regarding CBDC issuance. Carstens highlighted that while CBDCs can enhance financial access and streamline payments, they require updated laws addressing privacy and anti-money laundering measures. Balancing user privacy with transaction monitoring is essential, and CBDCs should provide consumers with expanded choices alongside traditional cash and commercial bank money. Carstens called for global collaboration in CBDC development, emphasizing the need for interoperability.
“It is simply unacceptable that unclear or outdated legal frameworks could hinder [CBDCs’] deployment. The work to address these issues needs to begin in earnest. And it needs to proceed at pace.” – Agustín Carstens, BIS General Manager
BIS Releases Framework for Securing CBDCs
The Bank for International Settlements (BIS) has released a security and resilience framework for central bank digital currencies (CBDCs). The framework aims to assist central banks in designing, implementing, and operating secure retail CBDC systems. It identifies new risks associated with the complexity and reliance on third parties in CBDC systems. BIS warns of potential vulnerabilities to cyber attacks from hackers, nation-states, or insider sabotage. To improve CBDC security and resilience, BIS has outlined a seven-step framework for central banks to follow. The framework includes implementing layered defenses, continuous system monitoring, and testing recovery plans. BIS recommends using the framework to assess current security capabilities and enhance them over time. The report also highlights enabling technologies like zero trust architectures, microservices, and DevSecOps that can strengthen CBDC defenses.
Hot Take: Establishing Legal Frameworks and Strengthening Security are Crucial for CBDC Implementation
The Bank for International Settlements (BIS) emphasizes the need for clear legal frameworks to enable the implementation of central bank digital currencies (CBDCs). This is essential to meet public demand and ensure financial access while addressing concerns such as privacy and anti-money laundering measures. Additionally, BIS has released a security and resilience framework for CBDCs to help central banks design secure retail systems. The framework identifies potential risks and provides control objectives to enhance CBDC security. It emphasizes the importance of implementing layered defenses, continuous monitoring, and testing recovery plans. To successfully implement CBDCs, countries must establish legal frameworks that facilitate their issuance while collaborating globally to ensure interoperability. Furthermore, strengthening security through frameworks like those provided by BIS is crucial to protect CBDC systems from cyber attacks and other threats.
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