As one of the initiatives, it is undertaking in its innovation centre, the Bank of international settlements (BIS) is developing a market intelligence tool to protect against risks to digital assets.
With the purpose of “fostering worldwide monetary and economic cooperation, and serving as a bank for Federal Reserve,” the Bank for International Settlements is a global financial organization that is owned by central banks.
When it comes to CBDCs, BIS has been at the forefront of encouraging Central Bank cooperation, including Project Dunbar, which includes the South African Reserve Bank (SARB).
Quantum computing, a quickly developing technology that uses the rules of quantum physics to tackle problems that are too complicated for conventional computers, is one of the major concerns noted by the bank.
The cryptography employed by central banks and the commercial finance industry to protect banking and financial systems may be cracked by quantum computers, according to BIS.
The integrity of payment solutions may be compromised, endangering confidentiality.
Given the sensitive nature of financial data over the long term, this vulnerability needs to be fixed well before the development of quantum computers.
This project will look into and test possible cryptographic defenses against quantum computers’ significantly increased processing capacity.
Testing use cases in different payment systems is intended to determine how the implementation of quantum-resistant cryptography will impact those systems’ performance.
The bank also noted that it is challenging to evaluate the dangers and economic possibilities of decentralized finance (DeFi) lending services, which have collapsed in large numbers due to stablecoins.
One reason is those unregulated companies typically self-report statistics on asset backing, trade volumes, and market capitalization.
BIS stated in a statement, “Individual statistics and commercially accessible solutions lack transparency and do not offer thorough insights. To provide information on market capitalizations, economic development, and threats to capital adequacy, the project aims to develop an open-source market intelligence platform.”
Additionally, the bank is working to improve CBDC security:
“Sela will investigate technological systems to support intermediaries providing CBDCs to users without the associated financial exposure, lowering financial costs in the process, coupled with a stronger emphasis on cybersecurity, leveraging on the strengths of the Bank of Israel in cybersecurity and on the HKMA learnings from the earlier Aurum project.”
BIS is also investigating how blockchain, smart contracts, and other associated technologies will be used for the shipment, monitoring, and exchange of so-called digitized Mitigation Outcome Interests, which are de facto carbon credits recognized under national verification processes compliant with the Paris Agreement and are attached to bonds.
Members of the BIS include central banks and financial institutions. The following central banks are members in Africa with the right to vote and are represented at general meetings:
– The Bank of Algeria
– Bank Maghrib in Morocco, and
– South Africa Reserve Bank (SARB)
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