Protecting the Integrity of CBDCs – The next game changer initiative in India’s payment industry

CXOToday has engaged in an exclusive interview with Ruchin Kumar, Vice President – South Asia, Futurex

• What is CBDC? Why is it considered to be the next Game-changer In India’s Payments Industry?

• • Centralized Bank Digital Currency (CBDC) is virtual money backed by a central bank instead of by commercial banks. India’s CBDC is referred to as the Digital Rupee (sometimes referred to as E-Rupee or e₹). Digital rupees take the form of digital tokens transacted in virtual wallets, such as those on mobile phones. They are distributed through intermediary banks. The e₹ comes in the same denominations as its cash counterpart, and is expected to have a similar degree of anonymity as well. Also like cash, it does not earn interest, and can be converted to other forms of currency.
  • CBDC is predicted to have several advantages. By reducing reliance on paper cash, it may in turn reduce the costs of printing, storing, and transporting cash. Given high-availability infrastructure and a certain amount of international cooperation, CBDC also stands to streamline interbank payments. Also, worth mentioning is how the e₹ stands to provide citizens with an alternative to cryptocurrency that is issued directly by the Reserve Bank of India RBI.

• Like any digital asset, CBDCs are also vulnerable to thefts and hacks. What are the cyber security risks to CBDC?
  • The security of digital transactions, assets, and sensitive data in general rests on hardware-based cryptography. This is as true in the payments sector as it is elsewhere. Strong cryptographic solutions will be needed to encrypt digital rupees and protect the digital wallets in which they are transacted. Organizations that handle different parts of the payment process likewise rely on encryption to protect the payment data that passes between users, merchants, payment processors, and banks.

• RBI is aware of the cyber risks associated with CBDCs and the need to mitigate them. What are some of the key RBI recommendations to safeguard CBDCs and their transactional data?
  • As a global payment processing and fintech hub, India’s payments sector is well-prepared for the challenges that come with securing CBDC. For example, most of the banks that will distribute digital rupees already have cryptographic infrastructure capable of performing encryption, tokenization, and key management. This infrastructure comprises hardware security modules (HSMs), key management servers, and other cryptographic solutions. Similarly, the fintechs that will develop applications that transact digital rupees may need to think about digital signing for authentication, or key management to tighten the security of encryption tasks.

• RBI’s pilot on the CBDC has tested the robustness of the system for the full-scale launch of CBDC. What are some of the RBI’s key recommendations to mitigate threats posed to CBDCs?
  • In a recent bulletin titled “RBI & Fintech: The Road Ahead,” the RBI encourages organizations in the payments and fintech industries to cultivate resilient cybersecurity infrastructure and to devote special attention to maintaining high levels of compliance. India abides by the strictest international compliance requirements, such as PCI DSS. Compliance isn’t only a requirement for many organizations: an organization that maintains a high level of compliance has a much easier time earning the trust of its partners and customers.

• Futurex being a global enterprise data security solutions firm is active in countries where CBDC is being developed or have already been launched. Are you replicating those services in the Indian market as well or the Indian market needs a different kind of approach?
  • According to the Atlantic Council’s online CBDC tracker, over 100 nations have reported efforts to develop a CBDC program, with about 20 in an advanced stage of development. The Indian market adheres to internationally recognized standards of cryptographic security and compliance. This means that cryptographic solutions that make sense in other markets usually work in India too. One thing that characterizes the Indian market in particular is a high demand for HSM cryptography and a quickly rising demand for key management and cloud solutions.

• What solutions are you offering to BFSI to secure CBDCs in India? How will these solutions make CBDC hack proof and build confidence in digital currency?
  • Futurex manufactures HSMs, key management servers, and cryptographic management tools that can be deployed on-premises or in the cloud. Our solutions fulfill virtually every possible cryptographic use cases associated with securing CBDC, from encryption and tokenization to key management and certificate authority (CA). One advantage Futurex has over other cryptography providers—in addition to our best-in-class technology and top-tier compliance—is our data center presence within India. Futurex operates data centers in Mumbai and Hyderabad, helping our Indian customers achieve low latency, high availability, and complete compliance with data localization requirements.