Brazil’s central bank, Banco do Brasil, has confirmed plans to begin exploring offline functionalities for its central bank digital currency, DREX, before its commercial launch.
The ambitious plan sees the central bank enlist the services of global security technology giant Giesecke+Devrient (G+D) as the technical lead for the pilot.
DREX is expected to compete for market share with Pix, a popular instant payments
platform in Brazil with over 150 million users. However, experts said that DREX has a fair shot given an array of proposed capabilities, including offline and cross-border payment.
“With offline payment, we can bring ease and technology to people who have difficulty accessing the technological infrastructure,” said Banco do Brasil Vice President Marisa Reghini. “Brazilians can benefit from the solution in their daily lives, carrying out secure transactions in local shops, for example, without the need of a bank account.”
The report did not disclose the technical standards for the offline payment functionality, but Reghini’s comments offer key insights into the proposed feature. She also clarified that users can access the CBDC without owning a traditional bank account.
This gives prominence to non-bank wallet providers, but it remains unlikely that commercial banks will be limited in operating a CBDC with offline functionality.
“A CBDC must work for everyone, anywhere, at any time,” said G+D Managing Director Raoul Herborg. “Only in this way can it be a truly inclusive public digital currency.”
G+D has garnered considerable experience in offline CBDCs, participating in Hong Kong‘s CBDC experiments as a technical partner. The firms joined Ghana’s retail CBDC pilot alongside several other leading commercial banks, payment service providers, merchants, and individual users.
The promise of offline CBDCs
While no central bank has formally integrated offline functionalities into its CBDCs, several
pilots have shown significant promise for a full-scale rollout. One study by Australia and New Zealand Banking Group (NASDAQ: ANZBY) relied on near-field communication (NFC) and preloaded cards to carry out offline CBDC transactions in a test environment.
India, China, and Canada have all dipped into offline CBDCs, experimenting with instances of intermittent and continuous internet outages. However, the absence of a globally acceptable standard for offline CBDCs continues to plague central banks keen to integrate them into their offerings.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
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