As several countries work toward a central bank digital currency (CBDC) launch in the coming years, the Bank for International Settlements (BIS) has published a security and resilience framework to protect such systems.
The framework, which is part of Project Polaris, is designed to protect CBDC systems from bad actors while safeguarding assets on systems. The BIS notes that while some central banks have robust security measures, the new framework provides details on “new and elevated threats facing CBDC systems.”
Project Polaris relies on a seven-step model for CBDC security while leveraging existing resilience architecture. The model urges central banks to prepare, identify, protect, detect, respond, recover, and adapt to the threats posed by bad actors.
“Cybersecurity and resilience are essential to underpinning trust in CBDC systems so they work for everyone in society whenever and wherever,” said Beju Shah, Head of Nordic Centre BIS Innovation Hub. “This framework can help guide central banks in their CBDC initiatives.”
The BIS notes that central banks are walking a tightrope regarding adoption metrics, with a cross-section of citizens raising concerns over the privacy of government-backed digital currencies. A security breach in CBDC systems “could erode confidence and trust in the infrastructure” which the BIS says could be fatal for adoption.
“The Polaris security and resilience framework has been developed to guide central banks in designing, implementing and operating secure and resilient CBDC systems to mitigate the operational, legal and reputational risks facing central banks from cyber threats or operational failures,” the statement read.
Although the framework appears to be a robust undertaking, the BIS notes that it is only a “baseline” model and will receive regular updates following consultations with central banks and private operators in the space. Multiple reports of security breaches in the decentralized finance (DeFi) industry have placed central banks experimenting with blockchain technology on their toes.
Impressive attempts to ensure safe CBDCs
Acutely aware of the risks posed by CBDCs, central banks are adopting a measured approach toward their development. Several central banks are adding several layers before their launch, including a Proof-of-Concept (PoC) stage, public consultations, and pilots with several stages.
After providing technical assistance to over 40 countries interested in the offering, the International Monetary Fund (IMF) published a CBDC handbook to guide central banks in exploring digital currencies.
Both the G7 and G20 nations are inching toward rolling out frameworks to guide the uniform developments of CBDCs among member nations, with nearly 130 nations indicating an interest in launching their versions.
Watch: Blockchain provides perfect foundation for CBDC
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