BIS releases guide to tackle ‘complex’ offline CBDC design

On October 26, the Bank for International Settlements released a design guide for using central bank digital currencies (CBDC) in retail payments offline, as part of its ongoing Project Polaris.

The guidelines were designed with the help of 12 vendors including Google, IBM and security printers Giesecke+Devrient in a series of deep-dive workshops between May and September 2023. Several central banks, including the European Central Bank, were present as observers. 

“The ability to pay when offline continues to be a priority for many central banks in their exploration of CBDC,” said Beju Shah, head of the Nordic Centre, BIS Innovation Hub. The guide builds on the previous offline handbook, providing central banks “with greater depth on the myriad choices required to design offline payments capabilities for CBDC systems”.

As part of the “complex undertaking” of designing offline CBDC, the BIS highlighted trade-offs include balancing the cost and security of a solution, with for example, a scenario where the design may need to support weeks of offline payments. 

Though there are “a number of mature pilots”, technology for offline payments with CBDCs is still evolving, the BIS said. “Currently, very few are production-ready or working at scale in a live environment.”

Some central banks have addressed this by collaborating with telecoms and mobile phone manufacturers. The People’s Bank of China has added a feature to its CBDC payment app so that sim cards can be used to make payments, even if the mobile phone has no connection or the battery has run out. 

However, there is no one-size-fits-all solution and central banks must weigh objectives such as financial inclusion, increased payment system resilience and building out financial services infrastructure. To meet these, design variations can include limits on the value of transactions, or specifying whether a device needs confirmation from a counterparty device to execute a payment.