According to Bank of Israel analysts, the so-called smart contracts that underpin automatically performed crypto transactions could be an area for central banks to regulate.
As per a paper released by the central bank on Monday, researchers participating in the central bank’s first technology experiment on digital currencies claimed smart contracts can be designed in “malicious” ways, resulting in losses for cryptocurrency users.
The Bank of Israel conducted tests utilizing an Ethereum-based blockchain to investigate how payments are made between two virtual wallets, assessing the mechanisms used to carry out the transactions and the level of anonymity they provided customers.
“An important question…is who writes the smart contract,” the researchers wrote. “Allowing anyone who wanted to to write the smart contract on the blockchain may pose a significant risk to the entire system.”
According to the International Monetary Fund, the Bank of Israel is one of roughly 100 central banks that have either implemented or are considering central bank digital currencies. Around 140 million people in China have already tried out the digital yuan, notably at the recent Winter Olympics in Beijing.
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