The European Union Agency for Network and Information Security views privacy as a top challenge to financial institutions’ adoption of blockchain technology.
Blockchain technology is a ledger that records assets and transactions entered by members of the particular blockchain network that is then distributed to all members of the ledger, which is why “distributed ledger” and block can mean the same thing.
ENISA released a report Jan. 18 on the security benefits, challenges and good practices of blockchain in light of a World Economic Forum report finding that over one billion euros ($1.06 billion) have been invested into blockchain start-up companies.
“Cyber security should be considered as a key element in the Blockchain implementation by financial institutions,” Udo Helmbrecht, executive director of ENISA, said.\
The report identifies a number of cybersecurity challenges to the adoption of blockchain, such as privacy and management of the private keys that authorize users to access the accounts, in addition to several technology-specific challenges such as generating the keys, and scalability challenges to balancing the size of the ledger with speedy processing.
ENISA lays out a list of best practices that financial institutions should adopt as they move to blockchain: (i) monitor internal activity, (ii) automate regulatory compliance, (iii) disclose information only to relevant counterparts and authorities, and (iv) adopt industry level governance procedures which will facilitate the updating of ledger implementations over time.
It’s not only financial institutions that see blockchain as a powerful security tool. Bloomberg reported Jan. 19 that the Defense Advanced Research Projects Agency, a research and development arm of the Department of Defense, is funding several start-ups to explore the use of blockchain to identify and deter cyberattacks.
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