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ECB exec: Next financial crisis to arise from cyberattack; bitcoin is "evil spawn"

ECB exec: Next financial crisis to arise from cyberattack; bitcoin is "evil spawn"

A senior executive at the European Central Bank has warned that the next financial crisis may be triggered by a cyber attack.

Speaking at a conference in Basle, ECB board member Benoît Cœuré pointed to the lapses in security that led to the $81 million heist at the Bank of Bangladesh in 2016, noting that hackers are increasingly targeting wholesale payment systems and the large money flows they handle.

Says Cœuré: "Failure to adequately protect against cyber-attacks may have far-reaching repercussions."

Earlier this year in British Columbia, G7 finance ministers and central bank governors took part in a simulation of the day after a major cyber-incident in the financial sector.

"This exercise showed that a major cyber-incident would require an internationally coordinated response," says Cœuré.

Forthcoming work of the G7 cyber expert group includes a cross-border cyber-crisis simulation exercise involving G7 financial authorities.

"Sharing of information, also across borders, is therefore essential in fending off cyber-attacks," he says. "But impediments, related to privacy, data protection or reputational concerns, abound. So, we need some structured thinking about how to overcome these impediments with a view to strengthening cyber-resilience."

As Cœuré was speaking, £5 billion had just been wiped off the share price of the UK's biggest banks in the wake of Brexit chaos at the UK Parliament, raising the spectre of a revival of the tapered asset relief bailout programme in the event of a No Deal scenario.

Returning to the last financial crisis, Cœuré observed that the first genesis bitcoin block mined by Satoshi Nakamoti was embedded with a Times headline from January 2009 about UK banks’ bailout.

"In more ways than one, bitcoin is the evil spawn of the financial crisis," says Cœuré, re-iterating a previously stated central bank view that the cryptocurrency is “a combination of a bubble, a Ponzi scheme and an environmental disaster".

This hasn't stopped central bank dabbling in the crypto realm, with 64% of eighty central banks surveyed by the Bank for International Settlements currently experimenting with bank-backed digital currency programmes.

Recent successful experiences also show a potential for cross-border remittances-related payment services, notes Cœuré, which confirms the potential for new technologies to support financial inclusion.

"However, there is broad agreement that a CBDC, in whatever form, is unlikely to be issued within the next decade, even among those four central banks that have indicated that they have reached the stage of developing a pilot project."

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