The prospect of the U.S. Federal Reserve developing a digital currency known as Fed Coin is the biggest disruptor to the financial services industry in the 21st century.
Digital currency (also known as digital money, electronic money, or electronic currency) is any currency, money, or money-like asset that is primarily managed, stored, or exchanged on digital computer systems, especially over the internet.
As the U.S. Federal Reserve examines issuing a digital currency independently and in partnership with other central banks, digital currency's purpose entails being trusted as cash, convenient for electronic payments while relying on blockchain technology.
On May 20, 2021, the U.S. Federal Reserve held a press conference to discuss the state of digital currencies. Board Chair, Jerome Powell stated that "we have been carefully monitoring and adapting to the technological innovations now transforming the world of payments, finance, and banking." Therefore, this announcement opens the floor to introducing digital currency in the U.S.
With the anticipated adoption of digital currency in the U.S., it will be necessary for the financial service industry to design the proper controls to mitigate risk from threat agents. A successful risk mitigation plan aims to clearly understand the actions needed to protect the digital currency and associated transactions, similarly, to protecting sensitive data via cybersecurity measures.
The risk associated with protecting digital currency includes theft, password loss, weak encryption, cyberattacks, system interruption, and account takeover, to name a few.
As the U.S. Federal Reserve focuses on better understanding the underlying technology, policies, and limitations around digital currencies, businesses should begin the process of understanding the risks, impacts, and technology. Because where a business is technically prohibitive currently, investments in future technology may be warranted.
While the primary purpose of developing and executing a new digital currency program may require a lot of time and resources, the results will provide a breadth of growth opportunities from a financial and operational perspective. Digital currency will become part of the fold in technology and cybersecurity.
To prepare for future implementations, Clearview Group can assess technology and cybersecurity readiness. Our firm can help create a short and long-term technology action plan based on your organizational and operational needs, support critical technology projects, and provide ongoing IT maintenance and support so you can focus on your core business. Our process encompasses management, operational, and technical security controls and solutions ranging from passive protective measures to active defensive responses. Our team can also work to ensure your organization has the appropriate security posture given today’s current threat landscape.
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