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

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.