In summary
- The ECB is advancing the implementation of offline payments of the Digital Euro on mobile phones, using a specialized hardware chip (eSE).
- Technical challenges to implementation have been identified, such as the complexity of the remote application and the involvement of multiple stakeholders.
- User privacy is key for the ECB, which seeks to offer a level of privacy similar to that of cash in both offline and online payments.
The European Central Bank (ECB) reported that it has “made progress” in implementing offline payments of the Digital Euro on smartphones, according to a new report.
The ECB plans to enable offline Central Bank Digital Currency (CBDC) payments by leveraging a specialized hardware chip, known as a Secure Element (eSE), embedded in users’ mobile devices.
To clarify how this ecosystem could work, the ECB indicated that “technical discussions were held with mobile device manufacturers and specialized technical service providers in October 2024.”
The ECB did not reveal the specific suppliers involved in these discussions.
Technical challenges
However, the report highlighted several significant technical challenges that must be addressed before the offline functionality of the Digital Euro becomes usable.
“Due to its highly controlled environment, deploying an application remotely is complex and involves multiple stakeholders,” the report noted. “The ECB has identified specific implementation options and outlined potential roles for the Eurosystem.”
This update follows the ECB’s call in August for industry experts to advise on the implementation of this technology in smartphones using embedded Secure Elements (eSE) and embedded SIMs (eSIM).
Offline CBDC payments have been highlighted for their potential benefits, including improving resilience during cyberattacks on online networks, improving accessibility in underdeveloped areas, and providing a higher level of anonymity similar to physical cash.
However, researchers such as the Bank for International Settlements (BIS), have pointed out challenges associated with offline transfers, such as problems with settlement of payments and new risks such as counterfeiting.
The ECB reiterated its commitment to privacy in its CBDC project and emphasized the role that offline payments could play in achieving this goal.
“Ensuring the privacy of digital euro users is an essential part of the project, and the proposed regulation reflects this with strict provisions on data protection and privacy for both online and offline transactions,” the report stated. “Offline functionality would offer users a level of privacy similar to cash, both for person-to-person payments and payments in physical stores.”
In April 2023, ECB board member Fabio Panetta said that although the digital euro would be designed to have the “maximum level of privacy,” that “does not mean that the digital euro will have the same level of privacy as cash. “
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