Bank for International Settlements (BIS) released a report titled “Central bank digital currency (CBDC) information security and operational risks to central banks”. The report urged the central banks to carefully consider the operational, technological, third-party, and business continuity risks linked with the introduction of CBDCs.
Risk in implementing CBDCs?
According to the report presented by BIS, the implications of introducing CBDCs extend beyond the realms of financial stability and monetary policy. It highlighted the critical need for central banks to develop a robust risk management framework.
The suggested framework by BIS spans the entire life cycle of a CBDC which includes research, design, implementation, and ongoing operation stages. The report mentions the cruciality specific design choices made by central banks. This might pose several risks ahead.
In order to reduce these risks, BIS proposed several tools and processes that the central banks can adopt. However, the aim will be to ensure that CBDCs remain a reliable means of payment. Concerns like potential interruptions, disruptions, and maintaining the integrity and confidentiality of transactions would be addressed through this.
The BIS report underscores the importance of the specific design choices made by central banks in shaping the risks they will face. To mitigate these risks, the report proposes tools and processes that central banks can adopt throughout the CBDC life cycle. The aim is to ensure that CBDCs remain a reliable means of payment, addressing concerns such as potential interruptions, and disruptions, and maintaining the integrity and confidentiality of transactions.
BIS report issues warning
The report mentioned one of the key risks i.e. the potential gaps in internal capabilities and skills within central banks. It added that the Central banks need to build up the capacity to select and supervise external vendors effectively while outsourcing CBDC.
BIS mentioned that this report is the result of joint efforts by central banks in the Americas within the Consultative Group on Risk Management (CGRM).
It is important to note that central banks globally are exploring the possibilities and challenges of CBDCs. This report comes in a much needed valuable insight, offering an understanding of the risks involved and a proactive framework for managing them effectively.
