Date of meeting: 9 June 2022
Item 1: Welcome
Tom Mutton (Chair) welcomed the Members to the fifth CBDC Technology Forum meeting.
Item 2: Debrief of last CBDC Engagement Forum
The Bank provided a short summary of the May 2022 CBDC Engagement Forum meeting.
Item 3: Offline functionality with CBDC
A Forum Member presented a view on why offline functionality should be a key feature of CBDC. The presentation exposed why offline settlement finality was important in a world where physical cash usage is diminishing. The presenter noted that offline settlement finality offered benefits in terms of availability, throughput and operational infrastructure costs, where existing real time (online) settlement systems encountered the biggest challenges. The presentation also mentioned that, without offline finality, any CBDC system would be difficult to differentiate from any other real time payment system. The presenter also mentioned drawbacks of offline systems, including the higher risk of counterfeiting and double spending due to added technical complexity.
Some Members challenged the need for instant offline finality, noting that card payments already provide users with limited offline functionality that might be sufficient. Others noted that offline payments for card networks were not real time, thus lacking instant settlement. It was also observed that offline CBDC functionality raised questions about liability for loss.
In terms of design, the presenter noted that an offline system would require cryptographically verifiable provenance and some form of secure hardware for cryptographic key storage and operation protection. This could present a number of challenges, the presenter spoke of a requirement for a certification path that verifies signature (with keys embedded in device). This would potentially require truncating token provenance (subject to an agreed threshold for consecutive offline payments) due to limited device storage on certain payment form factors. The Forum also discussed the number of permitted offline hops. Members noted they have discussed the risks of using secure hardware for offline transactions in past meetings, citing potential disadvantages of offline functionality such as requiring a trusted third party and restraining users’ behaviour on their devices.
One Member mentioned the need for a mechanism that records offline payments, for refunding legitimate payees of double spend activity where the duplicated tokens are detected and revoked from the system.
The presentation briefly touched on the time that would potentially be required to develop and launch offline functionality in a CBDC system. The group discussed whether offline capability should be regarded a day one requirement for CBDC, with mixed views.
Item 4: CBDC functionalities
The Bank sought the Forum’s thoughts on the relative importance and complexity of potential CBDC functionalities, including payments in scope, interoperability considerations and innovation features. Members offered a wide range of expert opinions on these matters, which the Bank noted it will reflect on in its further work.
Members discussed a number of different payments for a potential CBDC and the relative complexity to build each of those into the system, including Person-to-Person (P2P) payments, Person-to-Business (P2B), offline payments, among others.
Forum Members thought ensuring low barriers to entry into CBDC for potential PIPs (Payment Interface Providers) and building a simple and performant core infrastructure were the most important aspects of CBDC infrastructure if it were to meet a goal of supporting innovation. Other important features noted by members were ensuring customers are able to change wallet providers easily, ensuring CBDC remains an extensible platform and releasing public developer resources to facilitate wallet software development.
The Chair closed the meeting and thanked the Members for their contributions.
Tom Mutton, (Chair) Bank of England
Will Lovell, Bank of England
Katie Fortune, Bank of England
Danny Russell, Bank of England
Guillermo Pons, Bank of England
Ashley Lannquist, IMF
Bejoy Das Gupta, eCurrency
Dominic Black, Ledgerz
Edwin Aoki, PayPal
Geoff Goodell, UCL
Inga Mullins, Fluency
James Whittle, PayUK
Joshua Jeeson Daniel, JP Morgan
Keith Bear, Cambridge Centre for Alternative Finance
Lauren Del Giudice, Idemia
Lee Braine, Barclays
Mark Shaw, Spotify
Max Malcolm, Visa
Michael Adams, Quali-Sign
Patrick O'Donnell, Mastercard
Paul Lucas, IBM
Richard Brown, R3
Sarah Meiklejohn, IC3
Sean Mullaney, Stripe
Vikram Kimyani, Oracle
Will Drewry, Google
National Cyber Security Centre
Alan Ainsworth, Open Banking Implementation Entity
Andrew Flatt, Archax
David MacKeith, Amazon