BIS on CBDC: Common Challenges for Central Banks and the Private Sector

Agustín Carstens, General Manager of the Bank for International Settlements (BIS), delivered the opening speech at the "Guarding the Future of Money: Central Bank Digital Currency Cyber Security" conference held in Basel, Switzerland. He stated: Central Bank Digital Currency (CBDC) is key to innovative financial systems, and it is not only the responsibility of central banks around the world to lead this innovation, but the private sector will also play a crucial role in it.

The Security of CBDC is the Top Priority

Carstens mentions that the digital revolution has already impacted people's lives in various aspects, with households and businesses expecting financial services to offer them more convenience and digital features.

Central Bank Digital Currencies (CBDCs) are at the core of innovative financial systems, whether in wholesale form as a digital central bank reserve or in retail form as digital cash. CBDCs need to meet several requirements, such as user-friendly and versatile technical designs and robust legal frameworks. Most importantly, they must be secure and be seen as secure by the public.

New threats largely fall within the realm of cyber risks. Technological innovations have not only created space for more efficient and complex financial services but also provided new possibilities for criminal activities by wrongdoers. The crypto world provides several case studies showing how hackers can easily penetrate poorly designed and poorly regulated financial systems. Undeniably, significant security vulnerabilities are one of the factors that undermine people's trust in cryptocurrencies as useful financial tools.

The security challenges faced by CBDCs are not only new but also evolving continuously. The emergence of quantum computing has received widespread attention. However, with technological progress advancing so rapidly, other technologies like generative artificial intelligence are sure to emerge. The flexibility in CBDC design will be crucial in ensuring that security measures can quickly adapt to current and future challenges.

BIS Innovation Hub Working Closely with Central Banks

Carstens believes that ensuring the security of future monetary systems is a daunting challenge. However, it is inevitable if central banks are to fulfill their responsibility to provide funds in forms that meet public demands and expectations.

The BIS is ready to assist central banks in their efforts. The BIS Innovation Hub and the Cyber Resilience Coordination Center are working in this direction.

Since its establishment, the Innovation Hub has completed numerous projects, researching how to make CBDCs more secure, integrating post-quantum cryptography into CBDC systems, and ensuring online and offline cyber resilience in CBDC systems.

Meanwhile, the Cyber Resilience Coordination Center helps facilitate knowledge sharing, collaboration, and operational readiness among central banks.

BIS Collaborates with Central Banks on Projects: Global Competition on CBDCs, EU Commissioner Says Global Regulation May Be Needed

Private Sector Plays a Vital Role in Customer-Facing Functions

Carstens believes that while CBDCs will become the core of future financial systems, the role of central banks remains limited. Most customer-facing services fall within the purview of the private sector. Therefore, the cyber resilience of these institutions is crucial for maintaining trust in the entire system.

In fact, considering cybersecurity and resilience as public goods among these interconnected institutions may be reasonable. Since everyone's cybersecurity will affect each other, these collaborative efforts should not be independently pursued by individual organizations. Sharing knowledge together, cooperation between the private and public sectors will be a critical key in managing existing and emerging cyber threats.