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Cybersecurity will be hard pressed to take on the new challenges of bank managed digital currencies.
Banks are developing their own digital currencies. The introduction of Central Bank Digital Currencies (CBDC) is the beginning of an interesting trend that will change the cybersecurity dynamic for banking as it opens up an entirely new threat landscape.
The renowned Bank of England has issued working papers for research on CBDC’s, looking into the value and challenges. At least 18 different centralized banks have indicated they are proceeding with issuing their own sovereign digital currencies. The Block has compiled a list showing several are already launched, while others are in development or pilot phases (Central Bank of Venezuela, Central Bank of Tunisia, Central Bank of west African States: Senegal, United Arab Emirates Central Bank, Saudi Aeabian Monetary Authority, Eastern Caribbean Central Bank, Central Bank of the Bahamas, CBCS, People's Bank of China, Central Bank of Iran, European Central Bank, Central Bank of the Republic of Turkey, Bank of. Thailand, Bank of the Marshall Islands, National Bank of Cambodia, Monetary Authority of Singapore, Central Bank of Sweden-Sveriges Riksbank).
These digital assets will differ from traditional cryptocurrency, but will likely use some form of blockchain ledgers. It is expected the first iterations will be private blockchains, but the underlying technology will likely support the open benefits of public blockchains or hybrid variants for security, access, transparency, and privacy. These new systems will be complex but are intended to usher in a new set of financial services at lower costs to consumers.
There are potentially great benefits for those banks pushing the technology envelope, but there are also risks. I predict each will have a slightly different implementation, but it could foster an environment of competition that sparks rapid innovation across the sector. Such situations are highly beneficial to cybercriminals that are looking for weaknesses they can exploit. In the race to get new features to market, security is often de-prioritized and good cybersecurity practices can be overlooked. This creates higher likelihoods of vulnerabilities that can lead to hacks. Compromising a digital currency, backed by a major banking institution, is a fine target for cybercriminals.
CBDC’s could be great for all consumers but it will likely bring many headaches to the cybersecurity professionals tasked with protecting the new digital assets, infrastructure, and institutional reputations.