A Royal Bank of Canada study details the benefits of offline digital currency payments, but notes that it would entail certain security requirements, such as biometric authentication.
According to the study, RBC’s research into developing a central bank digital currency (CBDC) system that supports offline transactions on smartphones or standalone custom devices will offer users benefits, including enhanced resilience, accessibility, inclusivity, and privacy, particularly in remote areas without reliable or affordable internet connections.
The bank has laid out the findings of its research into integrating offline functionality into a CBDC system in a staff analytical note. The note considers the advantages and drawbacks of two different design options that would allow for intermittent offline or extended offline operability according to the nature and extent of internet outage or lack of availability.
The study highlights that a system supporting offline transactions will require developers to address security challenges. To minimize the risk of theft or loss, an offline CBDC may require security hardware with controls to guard against unauthorized tampering, as well as a user-specific personal identification number (PIN), password or biometric authentication stored on the device itself.
While the study identifies the key benefits to users of offline CBDC functionality as “enhanced resilience and better accessibility features” and “the privacy typically associated with offline payments,” the researchers note that adopting a security posture in terms of limits, controls, and functionality, where risks are sufficiently mitigated, is still a challenge for technology available today.
The Royal Bank of Canada formed a CDBC working group with five other central banks and the Bank for International Settlements in January 2020, which in October 2020 laid out a set of ground rules for the successful issuance of CBDCs.