DeFi Identified by Bank for International Settlements as Crucial Starting Point for CBDC Security Systems
DeFi (Decentralized Finance) Holds Key to Secure Future Central Bank Digital Currencies (CBDCs), Says Bank for International Settlements (BIS).
In a recent report, the Bank for International Settlements (BIS) emphasizes the potential of decentralized finance (DeFi) in shaping the security protocols for upcoming central bank digital currencies (CBDCs). According to the BIS, CBDCs are now being constructed using similar technological foundations as DeFi to identify and prevent potential vulnerabilities within CBDC systems.
As of the end of 2022, three CBDC implementations had been launched globally, accompanied by several pilot projects in progress, all without any reported attacks thus far. However, due to the relative novelty of CBDCs compared to traditional payment systems, there is a scarcity of historical data that could accurately predict threats specific to CBDCs. Although DeFi is not synonymous with CBDCs, various operational retail CBDC implementations are built on similar technology frameworks, including distributed ledger technology (DLT), smart contracts, tokens, digital identities, and immutable data.
This convergence enables DeFi to serve as an initial starting point for analyzing CBDCs. Nonetheless, as the field progresses, it may necessitate the development of more tailored frameworks.
The BIS stresses the pivotal role of central banks in safeguarding CBDCs against attacks or exploitations. It urges central banks to proactively prevent and mitigate adversarial attacks. In addition to identifying existing vulnerabilities, the report underscores the relevance of general cybersecurity standards that are applicable to both CBDCs and DeFi systems. Central banks must adhere to these standards to protect their systems against recognized attack types.
Recognizing the diverse technological approaches that may be employed in CBDC implementations, including novel and traditional methods, the BIS emphasizes the importance of drawing upon examples from various contexts. This comprehensive understanding will enable the formulation of robust defenses against potential threats. The creation of a well-documented catalog of threats is paramount for CBDC implementations to effectively address and mitigate cyber attacks.
By embracing the insights offered by DeFi and adhering to established cybersecurity standards, central banks can establish a resilient foundation to ensure the security of future CBDCs in an evolving digital landscape.”
Disclaimer: The information provided in this article is for informational purposes only and should not be construed as financial or investment advice. Cryptocurrency investments are subject to market risks, and individuals should seek professional advice before making any investment decisions.