The Bank for International Settlements (BIS) says that 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 that CBDCs are now being built using the same technology that powers DeFi to detect what could possibly go wrong for a CBDC system.
“At the end of 2022, there were three launched CBDC implementations around the world, along with several other pilots at varying degrees of size and scale underway, with no known attacks reported thus far.
Additionally, since CBDCs are relatively new compared with other payment systems, there is very little historical data to predict threats specific to CBDCs. While DeFi is not a synonym for CBDCs, several of the current operational retail CBDC implementations are based on a similar technology stack or make use of one or more of DLT (distributed ledger technology), smart contracts, tokens, digital identities and immutable data.
This allows DeFi to serve as the starting point for this analysis of CBDC, although more tailored frameworks may need to be developed in the future as the space matures.”
The BIS says that central banks will have to play a seminal role in protecting CBDCs from attacks or exploits.
“It is imperative for central banks to take action to prevent and mitigate these adversarial attacks. Aside from establishing the presence of gaps, this analysis has also highlighted that general cyber security standards are still applicable to CBDCs and DeFi systems, and central banks should adhere to these standards to safeguard their systems against commonly recognized attack types…
Given a given CBDC implementation may use novel or more traditional technology, or more likely a mixture of both, it is important to draw on examples from a variety of contexts to create the best defense against potential threats. A well-mapped catalog of threats is key if CBDC implementations are to adequately address and mitigate cyber attacks effectively.”
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Featured Image: Shutterstock/Tithi Luadthong/Natalia Siiatovskaia
