Former IMF official believes CBDCs need to function offline to gain mass adoption
Former International Monetary Fund (IMF) official John Kiff said a CBDC would need to work offline and such technology already existed in the form of prepaid cards introduced in the 1990s. I believe, says the blog post. It was published On the IMF website on Sept. 26.
Kif is a former IMF Senior Financial Sector Expert on Fintech and Digital Currencies and believes CBDC needs to be adopted globally.
First offline payment system
In 1993, Bank of Finland launched the Avant card system, the first in the world to put the offline CBDC concept into practice. The Avant card was designed to store offline payments using a custom-made card reader device, but was discontinued in 2006 when debit cards based on smart card technology emerged.
Similarly, National Westminster Bank in the UK rolled out a stored value payment platform called Mondex in 1995. It is now part of MasterCard Worldwide. This is a chip-equipped smart card that allows cash transfers without a signature, PIN, or transaction authorization.
To date, several companies are experimenting with offline CBDCs based on Avant cards and Mondex to process offline payments.
New technology embedded in the new version of offline CBDC involves the exchange of multi-digit authentication codes between parties involved in monetary transactions or Near Field Communication (NFC) connections.
Near field communication enables contactless communication between two electronic devices at a distance of 4 cm or less.
Players shaping the future of offline CBDC
Bank of Ghana is currently testing a stored value card called eCedi. This can be used with digital wallet apps or contactless smart cards for offline CBDC payments.
The initiative is being carried out in partnership with German banknote company Gieseck+ Devrient.
The IMF noted that fintech firm WhisperCash’s offline platform piggybacks on text-based, non-internet-enabled mobile phones called “feature phones.”
The WhisperCash system is available for just $2, making it an affordable investment for those without internet access.
The Bank of China, the Bank of Canada and the European Central Bank are also testing or considering testing their own offline CBDCs.
