Tag: BIS

BIS Conference Addresses Cybersecurity in Central Bank Digital Currencies (CBDC)

by Blockchain News

The BIS Innovation Hub and the Cyber Resilience Coordination Centre (CRCC) hosted a conference on November 8, 2023, focused on “Securing the future monetary system: cyber security for central bank digital currencies“. General Manager Agustín Carstens opened the event with a clear message: the advent of CBDCs is inevitable, and their security is paramount to the future financial system.

As the financial landscape is on the verge of substantial change, Carstens pointed out that central banks are tasked with not only keeping up with the digital evolution but leading the way. This leadership is embodied in the development of CBDCs, which are poised to be at the heart of the financial system. Whether they take on a wholesale or retail form, their design needs to be versatile and their legal frameworks robust to gain public trust.

The integrity of central bank money is a cornerstone of the public’s confidence in the financial system. CBDCs introduce new levels of security challenges, with cyber risks being a significant concern. Carstens cited the vulnerabilities exposed in the crypto universe as a cautionary tale for CBDCs, which carry much higher stakes. Addressing these risks is critical, necessitating a flexible design that can adapt to future technological advancements, including the potential impact of quantum computing and generative AI.

While focusing on security, Carstens didn’t overlook the importance of privacy in CBDC design, considering it essential for public acceptance, especially for retail CBDCs.

The BIS is firmly committed to aiding central banks in their journey towards a digital future. The Innovation Hub has been at the forefront, exploring solutions for secure and functional retail CBDCs, integrating quantum-resistant cryptography, and ensuring offline cyber resilience. Concurrently, the CRCC is enhancing collaboration and operational readiness among central banks through tools and exercises.

Carstens also recognized the vital role of the private sector, particularly in customer-facing services, and stressed the importance of shared cybersecurity and resilience as public goods among connected institutions.

The conference sets the stage for critical discussions on cybersecurity strategies for CBDCs, governance, risk management, and technical challenges, including the quantum computing threat. Carstens concluded with anticipation for the insights that the conference’s discussions will yield, reflecting the BIS’s readiness to guide and support central banks in securing the monetary system’s future.

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IMF Emphasizes Digitalization in Financial Inclusion Agenda

by Blockchain News

IMF Managing Director Kristalina Georgieva highlighted the role of digitalization in enhancing financial inclusion during a recent conference held in Marrakesh, Morocco. While advocating for comprehensive national strategies for financial inclusion, Georgieva also warned about the risks associated with digital financial services. This comes at a time when the IMF is actively involved in exploring cryptographic concepts and has recently presented a crypto-risk assessment matrix.

Speaking at the conference organized by the International Monetary Fund (IMF) focused on financial inclusion, Georgieva underscored the significance of digital tools in making financial services more accessible. “Digital is what moves help to people, investment, and the ability for the economy to accelerate,” she stated. She referred to digital currency transfers in Togo as an example, which were implemented during the COVID-19 pandemic to facilitate financial assistance.

While championing the role of digitalization, Georgieva also issued a word of caution. She stressed the need for regulatory frameworks to manage the risks associated with digital financial services, especially regarding financial stability. Her comments align with the IMF’s broader agenda, which includes rigorous scrutiny of cryptographic technologies that underpin digital assets.

The IMF is not a newcomer to the digital finance realm. On September 29th, the institution presented a crypto-risk assessment matrix, known as C-RAM, aimed at helping governments identify potential risks in digital asset operations. Moreover, in October, a “Synthesis paper” co-developed by the Bank for International Settlements (BIS) and the IMF received unanimous approval from the G20 Finance Ministers and Central Bank Governors, advocating for comprehensive regulation of cryptocurrencies rather than an outright ban.

As economies recover from the COVID-19 pandemic, the IMF is emphasizing the importance of digitalization, urging governments to focus on a future that is green, inclusive, and digitally advanced. The organization advocates for investments in green infrastructure, social assistance programs, and digitalization to foster equitable and sustainable recovery. The IMF is intensifying its policy advice on social protection and taxation, and has also launched a Climate Change Indicators Dashboard. On the digital front, it is exploring the macro-financial implications of digital currencies and the role of digitalization in financial inclusion. The IMF aims to help countries balance opportunities and risks in these key areas for a resilient recovery.

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U.S. Lawmakers Urge Stricter Export Controls on Advanced Semiconductors to China

by Blockchain News

Two senior Republican members of the U.S. House of Representatives have called on the Biden administration to tighten export controls on advanced semiconductors to China. The lawmakers, Michael McCaul and Mike Gallagher, chairmen of the House Foreign Affairs Committee and the House Select Committee on China respectively, expressed concerns over the Department of Commerce’s Bureau of Industry and Security’s (BIS) lax enforcement of existing rules. The call for action comes amid advancements by China’s Semiconductor Manufacturing International Corporation (SMIC) and Huawei Technologies.

On October 6, 2023, Representatives Michael McCaul and Mike Gallagher sent a letter to Jake Sullivan, the National Security Advisor, outlining their concerns about the BIS’s failure to enforce rules set on October 7, 2022. These rules were initially designed to limit the export of advanced semiconductors to China, particularly those that could be used in military applications and human rights abuses.

The lawmakers pointed to recent advancements by SMIC, which they claim have surpassed any current U.S.-based foundry. They also cited the unveiling of Huawei Technologies’ Mate 60 Pro smartphone, which incorporates advanced chips manufactured by SMIC, despite existing U.S. sanctions. According to the letter, “BIS’s lack of resolve has led to SMIC being more advanced than any current U.S.-based foundry.”

The letter outlines four immediate actions that BIS must take:

1. Update and issue final Oct. 7, 2022 Rules to limit workarounds for advanced semiconductor and tool exports to China.

2. Take immediate action against SMIC and Huawei, including full blocking sanctions.

3. Close the Cloud Computing Loophole to prevent Chinese companies from circumventing U.S. export controls.

4. Enforce the 60-Day Rule for moving entities from the Unverified List to the Entity List.

The lawmakers’ call for stricter enforcement of export controls highlights the growing tension between the U.S. and China in the technology sector. It also raises questions about the effectiveness of the U.S. government’s current approach to export controls, especially in light of China’s rapid advancements in semiconductor technology.

The letter also seeks answers to specific questions, including whether there was a unanimous position within the administration to implement the October 7 rules and what intelligence led to a change in Secretary Gina M. Raimondo’s opinion about SMIC and Huawei.

The letter from Representatives McCaul and Gallagher serves as a stark reminder of the challenges the U.S. faces in maintaining technological superiority and national security. It calls for immediate action from BIS to tighten export controls, particularly concerning advanced semiconductors and their potential use in China’s military modernization and human rights abuses.

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Financial Stability Risks from Cryptoassets in Emerging Market Economies Highlighted by BIS

by Blockchain News

The Bank for International Settlements (BIS), in partnership with the Consultative Group of Directors of Financial Stability (CGDFS), unveiled a detailed report on August 22, named “Financial stability risks from crypto assets in emerging market economies.” This research, spearheaded by BIS-affiliated central banks from nations such as Argentina, Brazil, Canada, Chile, Colombia, Mexico, Peru, and the United States, explores the possible repercussions of cryptoassets on the financial stability of emerging market economies (EMEs).

The report underscores the rapid evolution of digital finance and the swift growth of cryptoassets. While these assets have been promoted as low-cost payment solutions and alternatives for accessing the financial system, especially in countries with high inflation or exchange rate volatility, they have also “amplified financial risks” in less developed economies. The study specifically points out the “illusory appeal” of cryptocurrencies like Bitcoin as quick solutions to financial challenges in emerging markets.

Furthermore, the BIS report identifies various risks associated with cryptoassets, including market, liquidity, credit, operational, bank disintermediation, and capital flow risks. One significant concern highlighted is the potential for price volatility to propagate into market risk through direct holdings of cryptoassets by institutions or households. As the price of these assets fluctuates, holders face the risk of incurring substantial losses.

The study also touches upon the potential risks associated with Bitcoin exchange-traded funds (ETFs) in emerging markets. Such products can lower entry barriers for less sophisticated investors, increasing their exposure. The authors of the study caution that Bitcoin ETF investors might not own any crypto assets but could still face significant losses when Bitcoin’s price drops.

Additionally, the BIS advocates a cautious approach to crypto regulation. While some jurisdictions, like China, have opted for outright bans, others have sought to manage the industry through regulation. The BIS emphasizes the importance of not reacting in an “excessively prohibitive manner” as it could push crypto activities underground. Instead, the institution suggests a balanced approach, urging local regulators to adopt selective bans, containment, and regulation of specific crypto assets.

In conclusion, while the BIS and other reports highlight the potential risks associated with cryptoassets in EMEs, they also acknowledge the potential of the underlying technology. The challenge for regulators and policymakers will be to channel this innovation in socially useful directions while safeguarding financial stability.

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BIS Survey: 93% of Central Banks Engaged in CBDCs, 15 Retail and 9 Wholesale CBDCs Expected by 2030

by Blockchain News

The Bank for International Settlements (BIS) has released a survey revealing that 93% of central banks are now engaged in some form of Central Bank Digital Currency (CBDC) work, with retail CBDCs taking the lead over wholesale CBDCs.

The survey, which gathered responses from 86 central banks, shows that over half of these institutions are not just exploring CBDCs but are conducting concrete experiments or working on pilots. The progress in retail CBDCs is more advanced, with almost a quarter of central banks piloting a retail CBDC.

The BIS survey also highlights the perceived value of CBDCs. More than 80% of central banks see potential benefits in having both a retail CBDC and a fast payment system (FPS). The unique properties and additional features that a retail CBDC can offer are seen as key advantages.

The emergence of cryptoassets and stablecoins has been a significant influence, accelerating CBDC work for nearly 60% of the respondent central banks. However, the survey also notes that stablecoins and other cryptoassets are rarely used for payments outside the crypto ecosystem.

The survey suggests that by 2030, we could see 15 retail and nine wholesale CBDCs in public circulation. This projection reflects the growing interest in digital currencies by central banks worldwide.

In terms of motivation, central banks in emerging market and developing economies (EMDEs) are more likely to be driven by financial inclusion-related motivations in their CBDC work. On the other hand, the desire to enhance cross-border payments primarily drives the work on wholesale CBDCs.

Currently, four central banks have issued a live retail CBDC: The Bahamas, the Eastern Caribbean, Jamaica, and Nigeria. This development marks a significant milestone in the global adoption of CBDCs.

The BIS survey provides a comprehensive overview of the current state of CBDC development and offers valuable insights into the future trajectory of digital currencies. As the exploration and experimentation with CBDCs continue, their role in the global financial system is set to become increasingly significant.

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BIS builds out “game-changing” blueprint for the future monetary and financial system

by Blockchain News

The Bank for International Settlements (BIS) is set to redefine the global financial landscape with its newly released blueprint for a futuristic monetary system. Harnessing programmable central bank money, this novel infrastructure aims to bridge the gap between tokenised commercial bank assets and real-time transactions.

The blueprint, highlighted in a special chapter of the BIS Annual Economic Report 2023, brings a whole new meaning to financial transactions and economic arrangements, potentially revolutionising the global monetary system. By integrating tokenised forms of central bank digital currency (CBDC) with commercial bank deposits and other tokenised assets, the new design opens up an era of boundless possibilities for both economic and monetary system evolution.

“We are at the cusp of another major leap in the monetary and financial system, which will have far-reaching consequences for the economy and society at large,” says Hyun Song Shin, Economic Adviser and Head of Research of the BIS. According to Shin, this innovation is a game-changer, pushing the boundaries of traditional transactions.

This proposed infrastructure will deliver more than speed and cost efficiency. It will foster a wave of innovation enabling transactions that were previously inconceivable, limited only by the ingenuity of public and private sector innovators.

The envisioned improvements include streamlined securities settlements, tokenised deposits with in-built regulatory checks, and smart contract-enabled credit aimed at reducing trade finance costs for smaller firms. Furthermore, using privacy-protecting technology to share data on potential borrowers could broaden credit access to underprivileged segments of the society.

In collaboration with other public authorities and the private sector, central banks worldwide are eager to explore the possibilities offered by this new monetary system, seeking to enhance cross-border integration. The BIS continues to lend its support to these endeavors, fulfilling its role as a hub for international cooperation and innovation among central banks.

Further details of the blueprint will be available in the full BIS Annual Economic Report and the BIS Annual Report scheduled for release on 25 June.

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Bank of England Tests DLT Settlement System

by Blockchain News

The Bank of England and the Bank for International Settlements (BIS) Innovation Hub London Center have successfully tested a distributed ledger technology-powered settlements system between the institutions. As a result, the Bank of England will use the insights from this project in its real-time gross settlement (RTGS) system.

The joint pilot project, called Project Meridian, was recently documented in a report published by BIS on April 19. The 44-page document highlighted the successful synchronization of distributed ledger technology (DLT) between the banks for the purchase of houses in Wales and England.

This synchronization network allowed for the transmission of messages between the synchronization network and RTGS system using APIs, providing a generic interface that could be “relatively easily” extended to other asset classes, such as foreign exchange. By extending this system to other asset classes, it could significantly reduce the time, costs, and risks of transactions.

The Bank of England and BIS have been exploring the potential of DLT for financial settlements and transaction processing for several years. They have been working on multiple projects, including a cross-border payments project called Project Stella, which was completed in 2019.

The Bank of England has also been developing its own RTGS system, which is set to be launched in 2022. The new system will be built on modern technology and will replace the current system, which has been in operation for almost 20 years. The integration of DLT technology into the new RTGS system could further enhance its efficiency and security.

DLT technology, also known as blockchain, has the potential to revolutionize the financial industry. Its decentralized and transparent nature allows for secure, efficient, and cost-effective transactions, without the need for intermediaries. It has the potential to streamline the financial system and reduce the risk of fraud and errors.

The successful completion of Project Meridian is a significant milestone in the exploration of DLT technology in financial settlements. The potential for extending the system to other asset classes could significantly enhance the efficiency and security of financial transactions, which would benefit the entire industry.

In conclusion, the Bank of England and BIS Innovation Hub London Center have successfully tested a DLT-powered settlements system through Project Meridian. The synchronization network allowed for the transmission of messages between the synchronization network and RTGS system using APIs, which could be extended to other asset classes, reducing the time, costs, and risks of transactions. This is a significant milestone in the exploration of DLT technology in financial settlements and could enhance the efficiency and security of financial transactions in the future.

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BIS has long taken a cautious approach

by Blockchain News

Bitcoin (BTC) and other cryptocurrencies have been regarded with suspicion by the Bank for International Settlements (BIS) for a considerable amount of time. According to the BIS, however, there is no longer any need to exercise care since the “war has been won” between fiat and cryptocurrency.

In an interview with Bloomberg, the general manager of the BIS, Agustn Carstens, who is responsible for making the assertion, emphasized that “technology does not make for trustworthy money,” among other objections of cryptocurrency.

The Bank for International Settlements (BIS), which serves as the central bank for central banks, has emphasized the need for regulation and risk management in the cryptocurrency space. However, the BIS’s assertion that the battle between cryptocurrencies and fiat currencies has been won sparked outrage, satire, and corrections within the Bitcoin and cryptocurrency community.

“Want to irritate those fools to no end? Ignore their fear, uncertainty, and doubt (FUD) bait and put all of your attention on what’s occurring in the global south and on the streets of Nigeria.

In the meanwhile, Lady Anarki, an advocate for Bitcoin who recently shut down a firm that provided Bitcoin Security Education, said that “fiat and crypto are fundamentally the same exact swindle.”

“In the case of fiat currency, it is a group of wicked elite oligarchs who are building a rigged game system in order to benefit themselves at the expense of everyone else. Bitcoin is a system that was created with incentives and good economic concepts in mind, and it is meant to empower anybody who contributes value to the world.

As Carstens said, this is another another allusion to the fact that Bitcoin has been proclaimed dead, dead, and dead again. It is also a reference to the reality that Bitcoin lost the “battle” for money. The bear market in 2022 and 2023 is not going to be any different, and Bitcoin supporters on Twitter have been quick to embrace the chance to ridicule financial gurus who are dancing on the fictitious grave of the decentralized currency.

Despite this, Bitcoin has gained more over forty percent from its lows in 2022, and adoption of the Lightning Network is thriving as the community looks to be becoming more outspoken.

This week, the Bitcoin Information Service (BIS) issued another incendiary remark, and the famous podcast What Bitcoin Did, which is hosted by Peter McCormack, tweeted some helpful numbers to rectify the statement. Notably, the BIS said that “almost all economies incurred losses on their Bitcoin holdings” between August 2015 and December 2022. This is an important point to note.

In spite of the BIS’ best attempts to the contrary, it seems like the price of bitcoin will continue its upward trajectory.

The Bank for International Settlements (BIS) has been an outspoken opponent of cryptocurrencies, expressing worries about the volatility, scalability, and energy consumption of these digital assets. In contrast to Carsten’s statement in the Bloomberg interview that “technology does not make for trustworthy money,” the BIS has conducted research on stablecoins and is leading the creation of central bank digital currencies in conjunction with numerous nations.

Willem Middelkoop, an author and enthusiast for Bitcoin, recently emphasized that the conflict between fiat currencies and cryptocurrencies is not yet resolved. If one were to skim over the comments on the initial tweet from Bloomberg Crypto, one would get the impression that the conflict is just beginning to heat up.

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The Bank for International Settlements

by Blockchain News

In the days that immediately followed the collapse of the cryptocurrency firms FTX and Terraform Labs, there was an increase in the amount of trading activity that took place on significant exchanges, according to a report that was released by the Bank for International Settlements (BIS).

According to a report released by the BIS on February 20 and headlined “crypto shocks and retail losses,” after the announcement of the bankruptcy of Terra and FTX, the number of daily active users at some exchanges such as Coinbase and Binance “rose considerably.” This discovery was made in spite of the fact that the prices of Bitcoin (BTC), Ether (ETH), and a variety of other cryptocurrencies all fell in 2022. The bank provided the appearance that “customers wanted to weather the storm” by shifting their money into stablecoins and other tokens that were likely not looking as gloomy at the time. This was done in order to give the bank the impression that “customers sought to weather the storm.”

In contrast, the BIS reported that whales at the aforementioned exchanges “probably cashed out at the expense of smaller holders” by reducing their BTC stockpiles as retail investors bought cryptocurrency. This occurred as whales reduced their BTC stockpiles as retail investors bought cryptocurrency. This took place when whales sold off their BTC holdings while regular investors purchased bitcoin. The financial institution said that its experts had looked at the number of times bitcoin investing apps were downloaded. Assuming that each user bought $100 worth of bitcoin during the first month and each month thereafter, they found that approximately 75% of users had downloaded an app when the price of bitcoin was higher than $20,000. This was determined by assuming that each user bought $100 worth of bitcoin during the first month.

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The Financial Stability Board (FSB) is pushing for international regulations

by Blockchain News

A global financial regulator known as the Financial Stability Board (FSB) has the backing of the Bank for Worldwide Settlements (BIS). The FSB is now advocating for worldwide standards for decentralized financial systems (DeFi).

The Financial Stability Board (FSB) published a study on decentralized finance and the risks it presents to the overall financial stability of the country on February 16th. The research evaluated the hazards that decentralized finance posed to the overall financial stability of the country. The focus of the study was on identifying significant flaws, tracking transmission networks, and investigating the development of decentralized financial systems.

The authority said in the study that decentralized finance (DeFi) “does not vary materially” from conventional finance (TradFi) in its operations, despite the fact that DeFi offers a variety of “new” services. This was spoken in relation to the actions that DeFi was participating in. According to the reasoning of the Financial Stability Board, the fact that DeFi attempts to mimic certain aspects of TradFi’s activities raises the possibility for increased vulnerabilities brought on by the use of innovative technologies, a high degree of ecosystem interlinkages, and a lack of regulation or compliance. These three factors are what the Financial Stability Board considers to be the three main causes of increased vulnerability. This is the conclusion that one may reach by examining the evidence provided in the argument.

In addition, the authority said that the actual degree of decentralization in DeFi systems “frequently deviates greatly” from the statements that were initially made by the system’s founding fathers and mothers about the capabilities of the system. These assertions were made in the beginning, back when the technology was still in its infant stages of development.

In order to forestall the emergence of financial stability risks that are associated with decentralized finance, the Financial Stability Board (FSB) is collaborating with global standard-setting agencies to evaluate decentralized finance rules in a number of different jurisdictions. This will allow the FSB to prevent the risks from materializing in the first place. Because of this, the FSB will be able to forestall the appearance of these threats.

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