The Bank for International Settlements (BIS) has released a report highlighting the risks faced by banks using permissionless blockchains. The report by the Basel Committee on Banking Supervision describes several concerns related to these decentralized systems.
Risks for Banks
The BIS identifies a range of risks, including operational, security, and governance issues. The reliance on unknown third parties complicates due diligence and oversight for banks. The open nature of some blockchains, which allows public access to transactions, raises privacy concerns. The BIS also emphasizes that political and legislative changes could affect the stability of blockchains, increasing their vulnerability to attacks such as the 51% attack.
Privacy Issues
Open blockchains raise privacy concerns with visible transactions, and pseudonymity offers limited protection from cyberattacks. Additionally, the complexity of complying with AML and CFT regulations makes it challenging for banks to ensure they are not dealing with illicit actors.
Conclusion
The BIS report emphasizes that solutions to these issues are under development. However, integrating permissionless blockchains into traditional banking systems requires careful consideration of these evolving risks.
Overall, the BIS report underscores the need for further research and development of solutions to safely use permissionless blockchains in the banking sector.
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