Global fintech and funding innovation ecosystem

Offline and Internet-free CBDCs

IMF | John Kiff | Aug 6, 2022

WhisperCash - Offline and Internet-free CBDCsIn many regions, internet-free access may be a make-or-break feature for central bank digital currencies

As the world’s central banks rush to develop digital currencies, almost all the research and trials focus on internet-based technology. What will happen when the web goes down in a war or a natural disaster? And what about the 75 percent of the world’s adult low-income population that doesn’t even have internet access (World Bank Findex Database)?

Offline Digital CBDCs

Offline digital payment systems could verify availability of funds and validate transactions without the need to check in with an online ledger. They could use old-tech, non-internet-driven mobile phones or something like a souped-up stored-value card.

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Recently, several enterprises have launched updated versions of the Avant and Mondex concepts (initiatives from the 90's) that are capable of handling offline payments. Users send and receive funds by exchanging multi-digit authorization codes, either manually or using near-field communication (NFC) connections. Some require intermediary devices such as mobile phones or online connections to fully settle transactions, but that is to keep the device costs down and eliminate the need for internal battery power.

  • For example, the 170-year-old German banknote company Giesecke+Devrient is testing an offline CBDC platform with the Bank of Ghana based on a stored-value card.  The eCedi can be used by anyone with either a digital wallet app or a contactless smart card that can be used offline.
  • The People’s Bank of China has reportedly been experimenting with similar hardware wallets as part of its trials of the digital yuan.
  • Fintech company WhisperCash offers a sophisticated battery-powered credit-card-sized device for conducting digital currency transactions that costs about $70.  The company has also rolled out an offline platform that piggybacks on text-based, non-internet-enabled mobile phones. Known as “feature phones,” they can be had for as little as $5. The WhisperCash system involves a $2 device that’s attached to the phone’s SIM card.

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  • Even in low-income countries, 66 percent of adults own at least such a phone. In 2017–18 the Central Bank of Uruguay conducted a successful six-month test of a CBDC that users could access using feature phones (Sarmiento 2022).
  • The Bank of Canada is exploring such universal access devices intended to incorporate attributes of cash and prevent the interruption of digital transactions in case of an infrastructure failure.
  • In its exploratory work on a digital euro, the European Central Bank is considering offline functionality.

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