Basel Committee Evaluates Risks Associated with Permissionless Blockchains and Cryptocurrency
Concerns Surrounding Permissionless Blockchains
The Basel Committee on Banking Supervision (BCBS) has recognized various risks associated with permissionless blockchains. These networks, which are publicly accessible and operate on decentralized principles, present challenges in governance and security. The BCBS expresses particular concern about the implications for financial institutions.
Nature of Permissionless Blockchains
Commonly referred to as trustless blockchains, these are systems where anyone can participate and validate transactions. This openness contributes to a lack of restrictions, which could lead to unethical practices.
Identified Risks
- Increased vulnerability to technical attacks
- Legal and compliance risks that may arise
- Potential for activities like money laundering
- Challenges in oversight for banks due to decentralized governance
Mitigation Strategies
To counter these threats, the BCBS suggests Business Continuity Planning (BCP) as a crucial mitigant. This includes:
- Establishing protocols to prevent losses
- Implementing technology-based controls
- Testing risk management practices under stress conditions
While solutions are being developed, the BCBS stresses that further examination and adaptation will be essential as the cryptocurrency ecosystem evolves.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.