FameEX Hot Topics | BIS Advises Central Banks on Preparing for Central Bank Digital Currency Security

In a report released on November 29, the Bank for International Settlements (BIS) has emphasized the critical importance of prioritizing security in the development of central bank digital currencies (CBDCs). The report underscores the need for a comprehensive and integrated risk-management framework right from the research stage, with security being an integral component throughout the CBDC design process.

CBDCs come with a range of risks that can vary significantly depending on a country's specific conditions, objectives, and the evolving nature of the digital landscape. Therefore, it is imperative for central banks to continually manage and adapt to these risks. The risks associated with CBDCs can be categorized into different groups, with various factors contributing to each category. The scale and complexity of a CBDC project can amplify these risks.

One notable risk is the potential gaps in the internal capabilities and skills of central banks. While some CBDC-related activities can be outsourced, central banks must have the capacity to select and oversee vendors effectively. Operating risks can also emerge from human errors, inadequate definitions, or incomplete planning. The report emphasizes the cybersecurity challenges that CBDCs could face. These challenges include threats from other nations, hackers, users, vendors, or even internal actors. The report identifies 37 potential "cybersecurity threat events" arising from eight specific risk categories. Furthermore, the unfamiliarity of central banks with distributed ledger technology (DLT) can lead to inadequate vetting processes and overreliance on third-party providers.