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In a Word on the Block interview, Mitchell Amador, the founder and chief executive officer of Immunefi, a Web 3.0 bug bounty platform, told Forkast about how the introduction of central bank digital currencies may highlight the security benefits of the decentralized finance (DeFi) industry.
Short for central bank digital currencies, CBDCs are the digital form of a country’s fiat currency, issued by central banks. CBDCs are often touted as the future of money, with over 100 countries already experimenting with the technology.
Amador expects the introduction of CBDCs to highlight the security benefits of DeFi and attract more capital into the space. “There have already been billion-dollar hacks at traditional financial institutions. But we’re going to see an explosion of that with the rise of CBDCs,” he said.
“But we’ll all be looking then and be like, wow, those DeFi guys are so much more efficient and so much more secure. We were hitting them with a stick. We didn’t know we couldn’t do a better job. And this will in turn push more and more money into DeFi.”
Amador believes that CBDCs will have the same security perils as today’s traditional financial systems. “The world of CBDCs is going to have all this DeFi-like infrastructure operating under similar conditions. You have the exact same security concerns,” he said.
See related article: Stablecoin, CBDC issues take center stage at Singapore’s Future of Finance Forum
He also believes that state-backed hacker collectives like the North Korean Lazarus Group are preparing for the launch of CBDCs. “We have already seen the introduction of many more of these state-level attacking groups in crypto because they see it’s the future. They know CBDCs are going to be running on very similar rails and they would benefit from having teams and institutions that are directed at harming their opponents and getting a financial reward.”
“You’re probably familiar with the hack on the Bank of Bangladesh, which was also a Lazarus Group product. They built their expertise for attacking crypto by attacking central banks first,” explained Amador. “There’s a reason banks around the world have massive cybersecurity spends because they need it, otherwise they will be robbed. Those places are not safe for your money either. You just don’t hear about it.”
The World Economic Forum (WEF) of Davos fame is among the most significant proponents of CBDCs, arguing that CBDCs have the potential to reduce poverty, tackle economic crime and strengthen financial systems.
In a 2021 paper about the key cybersecurity risks of CBDCs, the WEF highlighted four main security concerns: the theft and loss of credentials, the potential of CBDC users with privileged roles, double-spending attacks and the threat of quantum computing for CBDC systems.
While worldwide interest in CBDC development is rapidly increasing, regulatory issues still remain a challenge, especially for cross-border CBDC transactions.
See related article: Collision or coexistence: Can CBDCs and crypto live side by side?