Swift CEO: Could blockchain technology have prevented the Bangladesh Central Bank robbery?

Rage Comment : At the beginning of this year, the Bangladesh Central Bank's information transmission system was hacked and 81 million US dollars were stolen, causing heavy losses. Blockchain advocates believe that if blockchain technology had been adopted from the beginning, this robbery might have been avoided. However, some people question that blockchain technology itself has certain security issues. It seems that how to improve the security system and avoid hacker intrusion requires further research and development of various technologies.

Translation: spring_zqy

Could blockchain technology have prevented the Bangladesh Bank heist?

Swift CEO says blockchain technology is the right choice for secure information transfer

Payments collaboration is part of major blockchain projects

In late April, blockchain evangelist Blythe Masters publicly stated in London’s Docklands that if banks adopted the transaction processing technology, it could solve many problems.

The former JP Morgan Chase & Co. executive may also have been talking about Swift, the messaging system used to transfer money between banks, which has been facing a crisis that has been lurking for months. Hackers used Swift to steal $81 million from the Bangladesh central bank and may have hacked into as many as a dozen banks.

The blockchain technology Masters was referring to is a distributed, encrypted money transfer system. It is the architecture behind Bitcoin and is considered a true transformation in the digital world. Although blockchain does not provide protection against stolen credentials, it may be able to better protect records than existing systems.

Richard Johnson, a market structure and technical analyst at Greenwich Associates, said:

“Blockchains are more secure. In theory, it’s impossible for someone to tamper with the database.”

The financial services industry, including regulators, has slowly begun to adopt blockchain, but the focus has been on its potential for cost savings, hoping to achieve a degree of automation with blockchain to reduce costs in back-end systems. However, an important point about blockchain that may have been overlooked is that it is also a security technology.

In the Bangladesh Bank theft, hackers used Swift to send messages to the New York Federal Reserve, instructing it to transfer Bangladesh Bank cash to accounts in the Philippines. They sent the messages posing as bank officials.

Conspiracy

Hackers have also used malware to alter bank records to overwrite their paths, something blockchain advocates say is harder to do with encrypted ledgers.

With a blockchain, statements about transactions aren't kept in just one place. Instead, the information is recorded on a network of computers, making it verifiable and keeping the other party honest. A hacker might have to compromise most of the banks in the network to cover their tracks, not just one computer. For the largest blockchains, like Bitcoin's, a hacker would have to compromise thousands of computers.

Swift insists its core communications service is secure and that the vulnerability was on machines on the network. Bank partners say those computers are the responsibility of their members. Swift says the "golden copies" of transactions in its data center have not been tampered with and can be used to verify the theft at the Bangladesh central bank.

"Golden Copy"

Of course, there are still some unclear issues with blockchain. Assets such as cash may have to be stored on the blockchain. This requires a certain degree of cooperation between the existing systems of financial institutions and the blockchain.

Johnson said:

“There is no proof of concept that I’m aware of that has put legal tender money on a system like a blockchain.”

Financial technology company Ripple is developing an internal ledger protocol that could help integrate blockchain with existing banking infrastructure. Meanwhile, Swift, as a core component of the Hyperledger project, could help advance blockchain technology.

According to Swift CEO Gottfried Leibbrandt, it’s clear where the next technology trends are headed, including blockchain, even though the technology itself is not completely immune to all cyberattacks. In addition, the keys used to access the blockchain have been facing a problem that has been around since the 20th century: cryptographic vulnerabilities.

Gottfried Leibbrandt

Leibbrandt said in an interview:

"You have to innovate to come up with solutions, you have to hold the keys to the money, if those keys are compromised then the money is going into someone else's wallet."