The design of offline payments with Central Bank Digital Currency (CBDC) is a complex undertaking. Some challenges and trade-offs cannot be solved easily. Further, since each central bank has unique requirements, there is no one-size-fits-all solution.
In the fourth report of Project Polaris, the BIS Innovation Hub is publishing a guide to help deepen central banks’ understanding of the technology underpinning offline payments with CBDC, building on the broad overview of offline payments provided by the handbook, published in the project’s first instalment.
This guide aims to help central banks who have already built knowledge and now want to focus more deeply on the requirements and design choices for offline payments with CBDC. It is based on information gathered in a series of workshops conducted across May and September 2023 in collaboration with 12 solution vendors and 6 observing central banks.
The workshops reinforced many of the conclusions from the earlier handbook and provided several additional areas of knowledge and understanding:
- Providing offline payments with CBDC is an important requirement for many central banks.
- Design choices must consider requirements for the whole solution.
- Trade-offs will exist between different requirements. For example, a high level of privacy could affect how suspicious actions in the system are detected and countered. To overcome this, central banks can take an iterative approach to design, exploring alternative ways to achieve their objectives.
- Solutions for offline payments with CBDCs are still evolving. Currently, very few are production-ready or working at scale in a live environment. That said, there are a number of mature pilots.
- For offline payments with CBDC, central banks can be a driving force for collaboration and innovation and should look to work with solution vendors and other potential future participants in the CBDC ecosystem.
The guide covers the current solution and technology landscape, the key design choices that shape an offline solution and offers examples of how a central bank can make design choices that meets their needs. It touches on many important aspects of offline payments including resilience, inclusion, privacy, risk management, device security and limits. Such technologies could also be applied to resolve issues related to identity, payments with commercial bank money, wallets and infrastructure for regulated stablecoins.
The ability to pay when offline continues to be a priority for many central banks in their exploration of CBDC. This guide builds on the foundational work of the offline handbook, providing central banks with greater depth on the myriad choices required to design offline payments capabilities for CBDC systems.
Beju Shah, Head of Nordic Centre, BIS Innovation Hub