The Importance of Cybersecurity in Central Bank Digital Currencies
An international financial institution owned by the world’s central banks has recently released a new framework aimed at helping members mitigate cyber risks associated with their digital currencies.
Central bank digital currencies (CBDCs) are being developed by several countries, such as the US and UK. The Bank of England has expressed interest in creating a “digital pound” to enhance confidence in the monetary system and provide more payment options for individuals.
However, the rise of digital currencies also brings about significant cybersecurity threats from cybercriminals and even nation states. To address these risks, the Bank of International Settlements (BIS) has introduced Project Polaris, a security and resilience framework for CBDCs.
The BIS emphasizes the importance of safeguarding CBDC systems against cyber-attacks and technical failures to maintain trust in the financial infrastructure. The framework consists of 100 control objectives organized into a seven-step plan for security and resilience: prepare, identify, protect, detect, respond, recover, adapt.
Central banks can leverage this framework to better understand the evolving threat landscape, incorporate appropriate technologies for security, and identify areas for improvement in their existing capabilities. The BIS acknowledges that risks cannot be entirely eliminated, but senior leadership must be aware of potential threats to establish an effective risk management strategy.
According to Beju Shah, head of the Nordic Centre BIS Innovation Hub, “Cybersecurity and resilience are essential for building trust in CBDC systems to ensure they are accessible and secure for all members of society.” The framework will serve as a foundational guide for central banks embarking on CBDC initiatives and will be updated regularly to address evolving threats and technologies.
In conclusion, as central banks around the world explore the implementation of digital currencies, prioritizing cybersecurity measures is crucial to safeguarding financial systems and maintaining public trust. The BIS’s new framework provides a comprehensive roadmap for enhancing security and resilience in CBDC systems, ultimately ensuring a safer and more reliable digital currency ecosystem.