The Bank for International Settlements (BIS) says decentralized finance (DeFi) could help write the blueprints for the security of future central bank digital currencies (CBDCs).
In a new report, the BIS says CBDCs are now being built with the same technology that powers DeFi to detect what could potentially go wrong with a CBDC system.
“At the end of 2022, there were three launched CBDC deployments around the world, along with several other pilots of varying size and scale, with no known attacks to date.
In addition, since CBDCs are relatively new compared to other payment systems, there is very little historical data to predict threats specific to CBDCs. While DeFi is not synonymous with CBDCs, several of the current operational retail CBDC implementations are based on a similar technology stack or utilize one or more of DLT (distributed ledger technology), smart contracts, tokens, digital identities, and immutable facts.
This allows DeFi to serve as the starting point for this analysis of CBDC, although more bespoke frameworks may need to be developed in the future as the space matures.
The BIS says central banks will have to play a pioneering role in protecting CBDCs from attacks or exploits.
“It is imperative that central banks take action to prevent and mitigate these hostile attacks. Aside from identifying gaps, this analysis has also shown that general cybersecurity standards still apply to CBDCs and DeFi systems, and that central banks must adhere to these standards to protect their systems against commonly recognized types of attacks…
Since a given CBDC implementation may use new or more traditional technology, or more likely a combination of both, it is important to use examples from different contexts to create the best defense against potential threats. A well-mapped catalog of threats is essential if CBDC implementations are to adequately address and effectively mitigate cyberattacks.”
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Featured image: Shutterstock/Tithi Luadthong/Natalia Siiatovskaia