A strategy to safeguard central bank digital currencies (CBDCs) from cybersecurity risks in the decentralized finance (DeFi) industry has been unveiled by the Bank for International Settlements (BIS).
These rules are intended to address the DeFi sector’s vulnerabilities, which could endanger CBDCs created using blockchain and smart contract technology.
Large-scale assaults on distributed ledger technology (DLT) protocols and smart contracts in the DeFi sector were addressed in the paper, highlighting possible operational and reputational issues.
To illustrate potential security risks that could affect CBDC infrastructures, the document references recent smart contract attacks that resulted in significant losses in the DeFi area.
The report shows how the internet, telecommunications networks, and digital devices have contributed to a dynamic and varied landscape of cyber threats.
The BIS issues a warning regarding potential DLT-related attacks on a number of CBDC components, including consensus protocols, cross-chain bridges, oracles, smart contracts, and offline components.
The BIS blueprint, which was made public on June 29, is a component of Project Polaris, which aims to develop reliable, secure CBDC systems that work both online and offline.
Project Polaris intends to offer a framework to central banks worldwide to develop, implement, plan, and manage CBDCs. The BIS advises central banks to strengthen their current protocols and establish specialized “security and resilience functional teams” to counter possible threats.
To ensure that the essential safeguards are put in place to protect against cyber risks, these teams would take part in every phase of a CBDC project. The paper advises central banks to exercise caution because there are numerous dynamic hazards associated with CBDC systems.
To improve security and resilience and as part of a holistic strategy for safeguarding digital currencies, the BIS advised these banks to employ cutting-edge technologies. As a result, it will be easier to guarantee the long-term viability of digital currencies.
