BIS Introduces Handbook Exploring Offline CBDC Payments

The Bank for International Settlements (BIS), an international financial institution owned by central banks, delves into the realm of offline central bank digital currency (CBDC) payments.

On May 11th, the BIS Innovation Hub Nordic Centre released an extensive guide on how CBDCs could function in offline transactions. The handbook was created in partnership with technical consultants Consult Hyperion.

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The guide, “Project Polaris,” examines the goals for resilience, cash-like features, accessibility, and other aspects of offline CBDC transactions. It also highlights potential risks associated with offline CBDC payments, such as counterfeiting and privacy concerns.

According to the BIS and Hyperion, offline CBDC transactions present privacy challenges, as they can either support anonymous transactions or reveal sensitive information depending on their design.

If the offline value transfer protocol does not support privacy by design, then offline payments can never be anonymous.

Additionally, offline CBDC transactions pose privacy and fraud risks concerning the identification and verification of counterparties. In certain cases, it may be essential for payers or payees to identify each other in offline CBDC transactions, which might not always occur in face-to-face interactions.

The payer may want to be assured of the identity of the payee, the details given to them are valid and their payment goes to the right place. <…> Impersonation fraud is a potential area of risk that central banks need to consider with regard to privacy.

The study also highlights the significance of interoperability and risk management systems for offline payments, emphasizing the necessity to detect potential breaches in offline purses.

The handbook concludes that defining the roles and responsibilities of the ecosystem in supporting offline payments is crucial, and cooperation between the public and private sectors is needed.

In other CBDC-related news, at the beginning of May, the legislators in North Carolina unanimously approved the bill banning CBDC payments and prohibiting the Federal Reserve from making North Carolina CBDC testing ground.

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• Source: https://www.bitdegree.org/crypto/news/bank-for-international-settlements-bis-weighs-in-on-offline-cbdc-payments