Real digital shouldn’t require fancy gadgets. Photo: Eduardo Soares, Unsplash.
One of the main features of central bank digital currencies (CBDCs), like the digital real under study, should be the ability to make transactions offline. Basically, this means allowing what paper money allows today, by not relying on the internet. Thus, it will allow all Brazilians to be able to use it, that is, it will ensure financial inclusion in these operations.
This view of the inclusion role of offline operations was common among the participants of the third webinar on the digital real that the Central Bank (BC) held this Thursday (9).
By offline transactions, BC refers to instant and irrevocable payments in which both the payer and the receiver are offline. That’s because they can, for example, be in a remote area or in case of signal drop.
But it also refers to cases where the online does not handle a high transaction fee. For example, in the subway at peak hours, said Ricardo Mourão, head of the BC’s Financial System Organization and Resolution Directorate.
Real digital couldn’t depend on internet and electricity
According to Mourão, the challenges of having offline operations include technological aspects, including the issue of using a device for the CBDC, functionalities that are intended to give currency and security.
“If you’re going to introduce a CBDC as a form of payment, say that it equals cash, but if it’s not available (to everyone), it’s a problem,” said Harish Natarajan, expert at the World Bank’s Payment Systems Development Group. (Bird). From an inclusion perspective, offline operations are necessary, said Tanja Hessdörfer, director of digital currency business development at G+D Currency Technology.
CBDCs need to be available in any setting, without the need for fancy cell phones or the best internet networks, for the sake of inclusion, Tanja said. His company has developed a solution for CBDCs and works on projects such as Thailand and Ghana. In addition, he is a finalist in BC Singapore’s CBDC Global Challenge, which is one of the most active in studying the topic.
And it’s not just having offline operation because there is no internet. Transactions must also be entered into this account when there is no electricity, said the expert from the World Bank (Bird). According to him, in most cases offline CBDC transactions are an additional feature to online payments and not the dominant one. So, go offline if necessary. In this case, it can also be used by those who want privacy in some transactions, even if within the security rules.
Digital identity must be required for security
A two-tier model is emerging, with the Central Bank brokering the processes, the online offering more security, and the offline operator by portfolio operators. Offline design requires resilience at four levels: one is whether there is token security or electronic identity of the digital currency, said Michael Wagner, a partner at consulting firm Oliver Wyman.
Another point is that not everyone will have access to cell phones. The third point is how to make transactions secure and therefore, creating a national digital identity can provide greater security. And finally, a cultural issue, which is, for example, being able to check your balance if there is no electricity, added Wagner.
The Central Bank will seven webinars about real typesl. The previous one was about security and privacye.