Central Banks Need Stronger Measures to Mitigate CBDC Risks, Says BIS Consultative Group

According to CoinDesk, a consultative group set up by the Bank for International Settlements (BIS) has stated in a report that central banks lack the expertise and skills needed to mitigate central bank digital currency (CBDC) risks and must prepare to implement stronger measures. Countries worldwide have been exploring issuing CBDCs to improve payment efficiency and financial inclusion. However, the introduction of CBDCs could have 'major implications' for the business model of central banks and could create a variety of risks. The BIS Consultative Group on Risk Management, which includes representatives from the central banks of Brazil, Canada, Chile, Colombia, Mexico, Peru, and the United States, highlighted potential gaps in central banks' internal capabilities and skills as a key risk. The group urged central banks to establish processes to identify, assess, monitor, and report CBDC risks. Implementing cutting-edge technology like distributed ledger technology, which powers cryptocurrencies, will not only require a high degree of expertise but also have central banks address technical issues they may not be currently equipped to handle. The report emphasized that for CBDCs to be a reliable means of payment, central banks need to address risks of interruptions or disruptions and ensure integrity and confidentiality. The BIS group recommended that central banks conduct careful and realistic assessments of risks and proposed an integrated risk-management framework that can be applied from the research and design stages to the operation of a CBDC.