Financial Security Institute: "Robust Security Essential for Stablecoin Trust"

There have been calls for the simultaneous establishment of robust security control systems if stablecoins are to take root as a major means of payment and settlement.

On September 16, the Financial Security Institute released a report analyzing the security measures in the Hong Kong Monetary Authority's "Guideline on Authorization of Stablecoin Issuers." The guideline, announced by the Hong Kong Monetary Authority last month, is the first to specify stablecoin security measures at a government level.

Through the guideline, the Hong Kong Monetary Authority has mandated that stablecoin issuers must comply not only with the security measures applied to existing financial services, but also with security protocols specifically tailored to stablecoins, including token management, wallet and private key management, and user account management.

In particular, for smart contracts that automatically execute stablecoin transactions, the guideline requires that a qualified third-party professional institution regularly verify vulnerabilities at least once a year. Private keys used for issuance must be stored on physical media, and strong control measures must be applied throughout the entire lifecycle of the private key, from generation and storage to use and disposal. To protect stablecoin users, the guideline also requires thorough identity verification during transactions and the implementation of two-factor authentication (combining two or more authentication elements) for important transactions, in order to prevent fraudulent transactions resulting from account theft.

The Financial Security Institute stated, "Stablecoins are expected to have significant growth potential in terms of reducing transaction costs and providing new payment and settlement experiences." However, it emphasized, "To become a major means of payment and settlement, it is essential to establish a robust security control system that can secure the trust of financial consumers, along with a legal and institutional foundation."

In its report, the Financial Security Institute proposed: ▲ "Security by Design," in which stablecoin issuers embed security throughout the entire process from design to development and operation, and ▲ "Security by Default," which ensures safety from the initial configuration stage.

Park Sangwon, President of the Financial Security Institute, stated, "The potential of stablecoins will only be realized when financial consumers can trust and use them," adding, "Based on our accumulated experience and expertise in digital asset security work, we will actively support the creation of a safe stablecoin environment, including the verification of smart contract security."