Digital currency is essentially a replacement of conventional paper currency by currency in the form of digital data on a technology-based platform on a mobile device or otherwise. The Reserve Bank of India (RBI) has already launched the Central Bank Digital Currency CBDC-W and CBDC-R on a pilot basis for the Indian market. CBDC-W and CBDC-R refer to wholesale and retail, respectively.
Mint spoke to some of the experts about the risks associated with Digital Rupee.
According to Stass Protassov, Technology President, Acronis, one of the risks which exist for most if not all digital currencies is double-spending scams exploiting protocol issues or application software vulnerabilities. In a trusted environment, the risk of potential fraud more commonly found in retail banking can be reduced. However, the risks still exist if a trusted fence system hasn’t been established, as seen in the famous case of the Bangladesh bank heist where a supposedly trusted and isolated system turned out to not only be available to external attackers but it was also not updated and insecure. Building a trusted fenced system is required.
Jyoti Prakash Gadia, Managing director at Resurgent India said that the risks involved with digital currency will primarily relate to the possible attack on the IT platform on which the entire mechanism is going to function. These may be in the shape of hacking of individual accounts /wallets of a person or a cyber attack on the entire system through the master server etc., unlike the physical currency notes which are subjected to theft and robbery etc.
Risks faced by the Indian Digital Rupee?
Double spending scams exploiting protocol issues or application software vulnerabilities are a risk existing for digital currencies, and Digital Rupee does not seem to be an exception.
“The desirable “offline capabilities” included in the project requirements bring with it the risk of “double-spending” because it will be technically possible to use a CBDC unit more than once without updating the common ledger of CBDC,” said Stass Protassov, Technology President, Acronis
“The Indian digital rupee can be subjected to cyber attacks as well as Individual hacking and there is a need for robust mechanisms, and adequate safeguards and all stages of the transactions, besides proper backups,” said Jyoti Prakash Gadia, Managing director at Resurgent India
There is a need for multi-layered security systems With checks at each stage. At the broader level, the systems will need to be strong enough to withstand all kinds of cyberattacks as people’s wealth and savings are involved and not merely ordinary data. At the individual level, the users will need to be careful and adequately equipped to handle the transactions with proper safeguards relating to password sharing of OTP, protection of the device etc, added Jyoti.
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