The Bank of Japan (BoJ) has published a research paper exploring the potential offline use of a digital yen using central bank digital currency (CBDC).
BoJ considers universal access and resilience as the two critical features of a CBDC. That means using the digital yen without electricity, especially given Japan’s frequently earthquakes and power outages. The paper very briefly explored the potential for a centralised versus a decentralised CBDC and stated that potentially both could be made capable for offline use.
The paper explored how to enable offline payments. Firstly, it examined using a chip (IC) on a SIM card but with a feature phone rather than a smartphone. The conclusion was it would not be user friendly.
For each of the device options, the Bank’s analysis for offline readiness was based on five criteria. It considered how it can store monetary value, communication between users, verification of the transaction including by users, the ability to enter a payment instruction, and whether the data can be stored without electricity.
For smartphones, given they are already used for wallets, they match all the criteria.
The bank explored the potential use of PASMO/Suica cards, which are used for railway and transport ticket passes as well as electronic money. However, in an offline scenario, there is no way to enter a value to pay. Potentially it could communicate with a smartphone that could be used to enter the amount of payment.
Next, there is potential for more advanced debit cards with mini keypads built-in and a tiny display. The BoJ considered storing a private key on such a card or a wearable device as a technical issue, but possible. The cards need to work in proximity, and authentication may need a fingerprint reader and a password.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now