Sweden Explores Offline Payments in the Final E-Krona CBDC Pilot Report

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Sweden’s central bank, the Riksbank, has concluded its exploration into the potential of a digital krona with the publication of its fourth and final report on the project, released on March 20. This culminating document sheds light on the outcomes of the e-krona pilot, particularly emphasising the user experience and the digital currency’s offline capabilities, revealing a range of mixed outcomes.

In a departure from the offline retail transaction model explored during the second phase of the pilot—which relied on storing transaction information on mobile phones—the latest report investigates an alternative approach. This new model proposes integrating a “shadow wallet” within the online framework alongside a physical payment card, a concept envisaged in the initial system design. The card, functioning as a stored-value card, would facilitate tracking offline transactions and adjusting account balances accordingly.

The study focused on four key scenarios: the process of loading and unloading value onto the payment instrument, executing offline payments at points of sale through near-field communication, transferring funds between cards without an online connection, and the application of limits on transaction numbers and balances on the cards.

One of the notable challenges identified in the report involves synchronising the payment cards to accurately reflect transaction sequences. Incorrect synchronisation could result in discrepancies in the “shadow wallets,” leading to potential liquidity issues. To combat this, as well as to prevent replay attacks—where a single e-krona might be illicitly reused—the system would employ counters to manage the sequence of offline payments.

Furthermore, the report discusses implementing restrictions directly on the cards to limit the amount and volume of offline transactions, indicating that changes to these restrictions would necessitate issuing new cards.

To secure communications between the payment cards and the system’s intermediary, R3’s Corda platform, digital certificates were utilised. Although these certificates were self-signed, the report acknowledges the need for a trusted and verified infrastructure before the system’s official launch.

Initiated in 2020, Sweden’s journey toward potentially adopting a CBDC continues beyond the pilot phase. The Riksbank has committed to further research on the digital krona, pending legislative approval for its official introduction.

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