BIS Unveils Robust Framework to Counter Cyberattacks on CBDCs

The Bank for International Settlements (BIS), an institution owned by constituent central banks, has unveiled a comprehensive framework designed to protect central bank digital currencies (CBDCs) from cybersecurity threats. Released on July 7, the framework addresses the increasing risk of security breaches that could compromise CBDC systems.

The BIS emphasized the importance of learning from recent incidents in the decentralized finance (DeFi) space, where smart contract hacks have resulted in significant value losses. These incidents serve as a stark reminder of the potential security risks that CBDC systems may face.

The framework focuses on ensuring the confidentiality, integrity, and availability of CBDC transactions. It emphasizes the need for CBDCs to have dynamic scalability to handle sudden surges in transaction volumes, eliminate single points of failure, operate continuously without interruptions, and remain functional even in the event of underlying financial institution outages.

The framework, named the “Prepare, Identify, Protect, Detect, Respond, Recover, and Adapt” framework, outlines a total of 104 control objectives. These objectives include measures such as implementing a 24/7 monitoring and alerting function, conducting thorough security assessments of cryptographic keys, and utilizing distributed denial-of-service (DDoS) protection services to mitigate network traffic volume.

To effectively implement the framework, the BIS recommends the establishment of a central bank senior leadership and board, the appointment of a chief security officer, and the formation of various information technology, security, and stakeholder teams.

While exercising caution regarding decentralized finance, the BIS has consistently advocated for the adoption of CBDCs. In June, the institution published a unified-ledger proposal aimed at facilitating cross-border transactions involving tokenized assets. Additionally, the BIS recently concluded a distributed ledger technology initiative in collaboration with the Bank of England.

By introducing this robust framework, the BIS aims to bolster the security and resilience of CBDCs, fostering trust and confidence in the digital currency landscape. The framework sets the stage for robust cybersecurity practices that will be crucial as CBDCs continue to evolve and gain prominence in the global financial ecosystem.

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