Central Bank Digital Currencies and Security
The Bank for International Settlements (BIS) emphasized the importance of security in issuing a central bank digital currency (CBDC). According to a report, a robust risk-management framework should be established from the research stage, and security measures should be integrated into the design of a CBDC.
Risks Associated with CBDCs
The risks associated with CBDCs will vary across countries and change over time. These risks can be categorized and are influenced by various factors. The scale and complexity of a CBDC contribute to the level of risks involved. Additionally, potential gaps in internal capabilities and skills pose a key risk for central banks, especially when outsourcing CBDC-related activities.
Cybersecurity Challenges
Cybersecurity for CBDCs can be challenged by different entities such as other countries, hackers, users, vendors, or insiders. The study identified 37 potential cyber security threat events stemming from eight specific risks. Furthermore, unfamiliarity with distributed ledger technology may lead to inadequate vetting or excessive reliance on third parties by central banks.
Hot Take: Ensuring Security for Central Bank Digital Currencies
Issuing a central bank digital currency comes with inherent risks that must be carefully managed. Security should be a top priority throughout the development and implementation stages of a CBDC. Central banks must possess the necessary capabilities and skills to select and supervise vendors effectively. Cybersecurity threats should also be addressed proactively to protect against potential attacks from various sources. By prioritizing security, central banks can ensure the successful and secure deployment of their digital currencies.
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