New research from the Bank of England reveals that while offline functionality for a potential digital pound is technically achievable, significant challenges remain in balancing security, usability, and fraud prevention. The central bank’s technical assessment, conducted with partners including Thales and Consult Hyperion, highlights the complex trade-offs required to enable transactions without internet connectivity.
The study confirmed that offline systems could successfully transfer funds between devices with immediate settlement, allowing recipients to reuse the money without reconnecting to the network. However, the absence of real-time online authentication creates vulnerabilities—particularly risks of double-spending and counterfeiting if the secure elements in devices were compromised. Unlike conventional payments that pair offline actions with instant online verification, offline CBDC transactions would only reconcile after completion, potentially leaving losses undetected until too late.
While offline functionality could enhance financial inclusion and system resilience during outages, the Bank emphasizes that technical feasibility alone doesn’t guarantee implementation. Policy considerations—including legal frameworks, operational costs, and commercial viability—will ultimately determine whether these features appear in any future digital pound design. The findings come as the Bank progresses through its multi-year exploration phase, weighing technological possibilities against practical economic and security requirements.
Key Challenges Identified:
- Security Risks: Potential for undetected double-spending during offline periods
- Device Vulnerabilities: Compromised secure elements could enable counterfeiting
- Delayed Reconciliation: Fraud detection only occurs after network reconnection
- User Experience Trade-offs: Balancing accessibility with robust safeguards
The Bank’s cautious stance reflects broader central bank deliberations about offline CBDC capabilities, with similar concerns emerging in the European Central Bank’s digital euro project. As development continues, policymakers must decide whether the benefits of offline access justify the inherent risks and complexities in what remains one of the most technically demanding aspects of CBDC design.