Journal of Financial Market Infrastructures
ISSN:
2049-5412 (online)
Editor-in-chief: Manmohan Singh
Need to know
- Offline payments should be analysed through the underlying financial structure, not just the technology. The paper uses balance sheets and an equivalent visual notation as tools to understand liabilities in the offline world.
- Extending offline functionality from CBDCs to private monies, such as instant-payment systems, creates new questions around issuance and fungibility.
- A multi-issuer offline-money model introduces additional risk and complexity to the financial system. Commercial banks issuing own offline tokens complicates settlement and interoperability.
- The paper suggests using a single-issuer model for offline payments, combining the benefits of offline functionality while avoiding unnecessary complexity and reducing the burden on the central bank.
Abstract
The work of central banks on central bank digital currency often includes offline payment functionality, where individuals and merchants can conduct transactions without online connectivity. This is comparable with cash: a bearer instrument that is a liability of the central bank. Therefore, the impact of offline central bank digital currency on balance sheets is well understood. Lately, there have been proposals to equip other types of payment systems, such as instant payment systems, with offline functionality. This would involve commercial banks and private money, making the situation less clear. Would each bank issue its own offline token? Would the resulting liabilities be fungible? In this paper, we look at different possible models and take an opinionated view on what a practical offline-capable instant payment system should look like.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
