Visa proposed an offline payment system for CBDCs in a new study.
The company’s paper entitled, “Towards a Two-Tier Hierarchical Infrastructure: An Offline Payment System for Central Bank Digital Currencies,” acknowledges the benefits of CBDCs – but says that they should be able to be made without an internet connection.
CBDCs are digitalized forms of fiat currencies that could run on a blockchain but don’t necessarily have to use distributed ledger technology. Unlike cryptocurrencies like Bitcoin and Litecoin, a CBDC would likely be controlled by a single entity (such as the Bank of England).
For the payments to be offline, Visa proposed a system that will use “open source technology and public key infrastructure” to sign transaction messages without connecting to the internet. The proposal outlines a protocol that can be developed in the future – but no code has been written yet.
“Recipients can submit signed, offline payment messages to an authorized wallet provider with a guaranteed settlement of those transactions to withdraw funds from the offline payment system,” the paper states.
Visa says that one of the main reasons central banks have been traveling digital currencies is that it will help connect unbanked entities to a “vibrant ecosystem of accessible Fintechs and other financial products.” The idea is that the offline payment system “creates an experience similar to physical cash,” says Visa. “But instead of paper in your wallet, it’s bits and bytes in your phone.”
Notwithstanding Visa’s research, most countries interested in such a technology are still in the very early stages of developing a CBDC. Some countries are even further, the Bahamas launched the first phase of its digital currency in October, and Chinese citizens are in a digital yuan trial.
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