The Digital Dollar Project has just released an important working paper, "Secure Adoption of a Digital Dollar – Operational and Compliance Risks for the U.S. Banking Sector."
📢 Exciting News! The Digital Dollar Project has just released an important working paper, "Secure Adoption of a Digital Dollar – Operational and Compliance Risks for the U.S. Banking Sector."
🌐💲 This marks the first in a series of risk- and privacy-focused papers aimed at exploring the potential risks and opportunities of a U.S. CBDC
The working group identified risks to federal and state-chartered #banks presented by a potential digital dollar, proposed risk mitigations for banks related to CBDC integration, and offered policy considerations designed to assist policymakers in better understanding CBDC-related risks and opportunities. The analysis focuses on twelve crucial risk-related themes:
🔍 Token Provenance: Unclear traceability obligations for financial institutions and potential obfuscation of token provenance through mixers and tumblers;
🚓 Onboarding Bad Actors: Potential inter-organizational reliance on the customer onboarding and verification processes of other financial institutions;
💸 Counterfeit and Double Spend: Potential for #counterfeiting existing tokens or creating fake tokens with new identifiers;
📝 Recordkeeping and Reporting: Potential difficulty complying with federal recordkeeping rules due to the introduction of token-based systems and a multitude of custodial arrangements;
🔄 Convertibility: #Currency and #settlement risk related to the convertibility of digital dollars against foreign CBDCs, privately issued stablecoins, and traditional deposits;
⁉ Erroneous and Misdirected Transactions: Potential inability to recover erroneous transactions and an unclear relationship between existing regulations such as Reg E and card chargebacks to CBDCs;
📚 Digital Financial Literacy: Lack of adoption driven by a lack of customer familiarity with the nature of digital assets, such as settlement finality and private key management;
🔐 Custodial Key Management: Risk of the mismanagement of #private #keys in both custodial, by banks, and self-custodial, by customers, arrangements;
🚫 Wallet Takeovers: Risk of unauthorized and fraudulent access of customer wallets by bad actors resulting in a loss of funds;
🔗 Secure Infrastructure: Risk of network reliability issues or technical compromises, such as encryption errors, malware, DDoS attacks, and hardware breaches;
🌍 Offline Transactions: Risk of #offline #payments avoiding anti-money laundering and counter-terrorist financing measures;