CBDCs require governments to pay special attention to security

Any country setting up a CBDC in the near future should ensure that they are ready to defend their digital assets and, most importantly, its private keys.

Today's financial world is increasingly digitalized, and naturally, central banks want to adapt to the changing environment. The use of cash is declining rapidly. Globally, the rise of digital payment apps and COVID-19 have only accelerated the decline in cash usage, fueling interest in digital currencies and demand for payment solutions simpler.

As crypto adoption continues to grow, the idea of ​​central bank digital currencies (CBDCs) has also gained momentum. Governments around the world have been flirting with the idea of ​​issuing their own CBDCs, and have been considering the idea, a handful of which have already been launched.

It is unclear when CBDCs will be standardized. Don't expect CBDCs to resemble the decentralized features of Bitcoin (BTC) because, by definition, a central bank is a centralized entity. That being said, they can offer some of the same benefits, such as reducing payment verification times and providing proof of transaction. However, there are still a lot of challenges to overcome.

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Among these challenges are the operational risks of the "cybersphere". While banks are used to investing resources in backing up their “fiat” reserves, backing up digital currencies requires a different mindset. Blockchain technology has some inherent vulnerabilities, including anonymity and irreversibility, which can be exploited by clever scammers. However, it is unclear whether CBDCs will take advantage of blockchain technology.

Could CBDCs potentially expose central banks to new types of cyber threats? And how would these potential threats or vulnerabilities manifest?

Hackers have become increasingly sophisticated and brazen in their attacks over the past few years. Traditional finance and blockchain protocols find themselves victims of...