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The European Central Bank (ECB) said that it has “made progress” in implementing offline Digital Euro payments on smartphones in 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 might function, the ECB stated that “technical talks were conducted with mobile device manufacturers and specialized technical service providers in October 2024.”
The ECB did not disclose the specific providers involved in these discussions.
Technical challenges
However, the report highlighted several significant technical challenges that must be addressed before offline Digital Euro functionality 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 deployment options and outlined potential roles for the Eurosystem.”
This update follows the ECB’s call for industry experts in August to advise on deploying this technology on smartphones using embedded Secure Elements (eSE) and embedded SIMs (eSIM).
Offline CBDC payments have been highlighted for their potential benefits, which include enhancing 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 issues with settling payments and new risks like counterfeiting.
The ECB reiterated its commitment to privacy in its CBDC project and emphasized the role offline payments could play in achieving this goal.
“Guaranteeing 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. “The offline functionality would offer users a cash-like level of privacy, both for person-to-person payments and payments in physical shops.”
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 "doesn’t mean that the digital euro will have the same level of privacy as cash."