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CBDC Design Must Address Cyber Risks Says BIS Report

Bank of International Settlements Report Signals Wake-Up Call on Cybersecurity for CBDC Adoption.

A recent report from the Bank for International Settlements (BIS) has issued a warning about the potential vulnerability of central bank digital currencies (CBDCs) to increased cyber threats, including cyberattacks, digital bank robberies, and other hacks. The report emphasizes the growing significance of cybersecurity as a substantial risk associated with the expanding adoption of digital cash initiatives by monetary authorities worldwide.

The BIS report underscores the pivotal role of cybersecurity, stating, “Cybersecurity is a key risk for CBDCs,” as more than 130 central banks globally are currently involved in developing projects centered around this evolving technology. The widespread adoption of CBDCs holds the potential for “far-reaching implications” concerning the operations and risk management strategies of central banks.

The analysis raises concerns that CBDCs utilizing distributed ledger systems and other innovative technologies may face unique cyber threats, given the absence of widely accepted security standards.

In the most alarming scenarios, attackers compromising a central bank’s digital systems could potentially target the equivalent of a digital bank vault, posing a risk where hackers could potentially access and steal the nation’s funds, affecting users in the process.

Adding to the complexity is the challenge posed by “limited real-world data” on cyber risks associated with CBDCs, regardless of the specific technological approach used. However, the report suggests that conducting small-scale pilot tests for CBDCs can serve as a valuable strategy for identifying and mitigating vulnerabilities before any large-scale launch.

Notably, more than 10 countries have already introduced live CBDCs, with China actively trialing a digital yuan among 200 million consumers. The rapid increase in central banks exploring this technology, which has tripled in just three years to surpass 130 participants, highlights the global momentum toward CBDC adoption. The European Central Bank has also recently initiated advanced prototyping for a digital euro.

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