Visa has published a technical paper that outlines a novel approach for offline point-to-point payments between two devices, touting it as a means for central banks to replicate the physical exchange of cash using digital currencies.
With financial inclusion top of mind for central banks, CBDC design considerations need to include a framework for the exchange of digital currencies when neither the buyer nor the seller has a connection to the internet.
The protocol outlined by Visa allows digital money to be directly downloaded onto a personal device, such as a smartphone or tablet. The money is stored on a secure hardware embedded in that device and managed by a wallet provider.
CBDC can be transacted from one device to another device directly without any intermediaries such as banks, payment networks, or payment processors using Bluetooth and Near Field Communication.
The technical paper goes into more detail: "To facilitate the secure issuance and transfer of CBDC, we envision a CBDC design under a two-tier hierarchical trust infrastructure, which is implemented using public-key cryptography with the central bank as the root certificate authority for generating digital signatures, and other financial institutions as intermediate certificate authorities.
"One important design feature for CBDC that can be developed under this hierarchical trust infrastructure is an offline capability to create secure point-to-point offline payments through the use of authorized hardware. An offline capability for CBDC as digital cash can create a resilient payment system for consumers and businesses to transact in any situation."
Visa says the functionality may be useful where internet connectivity is intermittent and a user may only gain full connectivity periodically, say by visiting a local internet café.
"The challenges that central banks face in launching CBDC are vast and complex," states Visa. "Implementing new technologies is an iterative process, requiring input from diverse stakeholders, and we want to contribute our expertise and thinking as crucial design decisions are being shaped."