As global organisations increasingly leverage digital assets in their business, key management and transaction security within traditional banking has become increasingly important. A key part of this is the use of cryptographic keys which encrypt and protect sensitive information. However, traditional key management systems are not fit for purpose in the blockchain age. In this article, we explore how and why a blockchain-first solution is needed for the adoption of digital assets by financial institutions.
Key management systems are designed to generate, distribute, store, and manage cryptographic keys. They ensure the integrity and confidentiality of financial transactions and form an integral part of any security system.
Current systems are not fit for purpose
Many financial institutions have already developed mature key management systems to allow them to secure data, business applications and transactions. However, with the increase in blockchain adoption and digital assets, existing key management technology has not caught up with the level of protection and compliance mandated by regulation and security.
Blockchain technology introduces a decentralised and immutable ledger system, which is fundamentally different from traditional centralised databases. However, this shift presents several challenges for traditional KMS:
- Governance: Traditional KMS are designed for centralised environments with standardised rules and ecosystems.
- Scalability: Current systems lack the security, flexibility, and utility at the scale needed to support millions of customers and billions of transactions over multiple networks.
- Immutability: Traditional KMS do not account for the permanence of blockchain records and the impossibility of reversing transactions. Blockchain wallet keys, if lost, represent the permanent loss of any assets contained.
- Interoperability: Due to the many blockchain protocols and types of digital assets, transaction signing technology needs to integrate seamlessly with diverse protocols and standards. KMS lack this flexibility.
Adapting to secure digital assets
To address these challenges, financial institutions need advanced signing solutions that are specifically designed for the blockchain era, and that can interact with their existing KMS. Such solution must offer:
- Distributed operation: Able to execute on multiple networks and protocols
- Proven and robust security protocols: Built for the unique challenges presented by blockchain and its ecosystems and tested in the most demanding use cases
- Interoperability and flexibility: Supporting various blockchain platforms and digital assets while ensuring seamless integration and operation
How Overledger Authorise integrates with existing KMS
Built for blockchain and with flexible APIs, Authorise integrates seamlessly with an existing key management systems, anti-fraud engines and AI models to authenticate and sign transaction requests on chain.
Authorise enable keys to be generated and stored automatically, in proprietary or third-party vaults, it also means that once transactions are signed, they are checked and routed to any supported blockchain through Overledger, a ‘universal decoder’ for public and private networks. This provides double-layered security and enables developers and organisations to confidently adapt to the blockchain era.
For developers, this means they no longer need to code specific cryptographic interfaces to connect every blockchain to every internal system.
How was Overledger Authorise used in the digital pound experimentation of Project Rosalind?
During our work on Project Rosalind, we successfully deployed an early beta version of Authorise to enable authorisation signing for the experimental UK CBDC. During the project, we built a solution that created the infrastructure needed to facilitate payment interface providers (PIP) signatures so that when in production, PIPs could operate this service within their current infrastructure to facilitate secure transaction signing.
Why should banks care?
Key management systems play a key role in safeguarding sensitive information, from personal data to financial transactions. They help financial institutions ensure confidentiality, integrity, and authenticity, but alone, they are not equipped to handle the complexities of blockchain technology and digital assets.
Financial institutions must adopt and integrate advanced solutions that are tailored to the decentralised, scalable, and immutable nature of blockchain. This will help to ensure the security and integrity of digital financial transactions in the blockchain age.
How Quant can help
