The Bank of Canada has been conducting research to determine under what conditions a CBDC would be necessary and which design features would be relevant for Canadians with diverse payment needs and circumstances.

In recent years, new technologies have allowed for the rapid growth of digital and electronic payment methods (Huynh, Nicholls and Nicholson 2019). However, little has changed for offline payments, and bank notes remain the only commonly used payment method that does not require an internet connection. Moreover, no single payment method allows users to transact seamlessly both offline and online.

An offline CBDC that allows two users to transact while neither is connected to the internet could complement bank notes. Additionally, as a digital product,1 an offline CBDC could reduce frictions between payment methods and allow for funds to be spent online when connectivity resumes. Or it could be used in the same ways as a typical digital means of payment. Offline functionality would offer users enhanced resilience, a high level of security and privacy, and increased accessibility. Considerations for offline functionality drive many features of the overall design of a CBDC system.

Thinking about offline payments

A CBDC system can be designed to function offline in two distinct ways. In each case, the duration of the offline period informs key design features and technology underpinnings and determines user functionality. End users must interact with the offline CBDC system through a device that offers offline functionality—either a stand-alone custom device or a smartphone with a built-in application. Note that offline functionality does not preclude online purchases. For instance, a consumer could receive funds offline in one transaction and, in a subsequent transaction, seamlessly order items at an online store or request a taxi through an online app.

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