CBDC Cybersecurity To Be Tested By Hong Kong, Bank Of Israel And Bank For Int’l Settlements

CBDC, or central bank digital currency, will be the main focus of three major financial and lending institutions to validate the feasibility of new digital currency system, the Bank of Israel said on Friday.

Upon its launch in the third quarter of this year, the joint CBDC project by the Bank of Israel, Hong Kong Monetary Authority, and the Bank for International Settlements Innovation Hub will employ a two-tiered approach.

This means that the CBDC would be transferred to consumers through financial intermediaries after being issued by the central bank.

Under the direction of the BISIH Hong Kong Centre and utilizing the groundwork established by Project Aurum, Project Sela will investigate cybersecurity vulnerabilities in the context of retail CBDC.

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CBDC Initiative To Give Intermediaries Less Exposure

BOI stated that the test will be cyber-security protected, and under the proposed approach, intermediaries will have no financial exposure from clients storing or transferring digital money, resulting in decreased risk and expenses.

Customarily, commercial banks distribute central bank money to the general population. Even in digital payment systems, transferring monies from one end to another typically exposes the intermediates participating in the transaction to financial risk, although for a brief period.

This research will investigate the sustainability of a two-tier architecture in which intermediates are “exposure-free.” Israel and Hong Kong will evaluate, as part of their testing, whether this makes the country less susceptible to cyber attacks.

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Israel Makes Headway Into CBDC

This is the closest Israel has ever come to investigating the possibility of a CBDC. A committee from the central bank recommended against introducing a…

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