The Bank for International Settlements (BIS) is actively exploring offline payment opportunities involving central bank digital currencies (CBDC).
On May 11, the BIS Innovation Center Nordic Center published a comprehensive playbook exploring how CBDCs could be used for offline payments. The guidance, written in collaboration with technical advisor Consult Hyperion, addresses the goals of resiliency, cash likeness, accessib ility and other offline CBDC features.
The paper, titled "Project North Star," highlights new potential risks posed by CBDC offline payments, including impersonation or privacy concerns. According to BIS and Hyperion, offline CBDC payments pose a privacy threat because they "both enable anonymous trans actions and, by design , reveal privacy."
Some of the privacy concerns listed include the level of privacy protection afforded by value transfer protocols. “If offline value transfer protocols are not designed to support privacy, then offline payments can never be anonymous,” the manual reads. Offline CBDC payment transaction s also raise privacy and even fraud concerns when it comes to the identification and verification of counterparty users. In some cases, it may be critical for offline CBDC recipients or payers to identify counterparties, and such transactions may not always involve face-to-face contact. Cent ral Banks must take this situation into account when designing offline CBDCs, the BIS wrote, adding: Payers may wish to be certain that the recipient is being identified, that the details provided to them are valid and that their payment is going to the right place.Impersonation fraud is a potential central bank privacy consideration areas of risk."
The document also mentions the interoperability of offline payments and the importance of risk management systems, emphasizing the need to be able to detect potential vulnerabilities in offline wallets. "The roles and responsibilities of the ecosystem in supporting offline payments need to be bet ter defined, and collaboration between the public and private sectors is required," the handbook states. Offline functionality is a major feature of several CBDC projects currently being developed by central banks around the world. As previously reported, countries such as Australia, India and R ussia have been researching offline CBDC payment technology.
Australia's Central Bank Plans to launch a "live trial" of a cbdc with office payment capabilities in the "coming months". Unctionality of CBDC SINCE March 2023. The Central Bank of Russia Expector for the digital ruble by 2025.
