VISA Encourages Internet-Free Transactions for CBDCs

Visa Will Integrate with Digital Currency Platforms
Visa Will Integrate with Digital Currency Platforms

VISA has been particularly active in the crypto space recently, launching new initiatives to improve the adoption and ease of spending for digital assets. The company’s recent proposal could bring new meaning to cryptocurrencies, especially for future government-issued assets.

Cash’s Convenience with Digital Payment’s Benefits

VISA published a paper examining the possibility of using Central bank Digital Currencies (CBDCs) in entirely offline environments.

Titled “Towards a Two-Tier Hierarchical Infrastructure: An Offline Payment System for Central Bank Digital Currencies,” the paper proposes an offline payment system that will allow governments to enjoy even more seamless use of their assets.

In the paper, VISA acknowledged that CBDCs have become more prevalent in today’s financial ecosystem, as more countries are examining the potential of moving their sovereign currencies to the digital space. However, while the company praised the move, they also point out the need for offline transaction processing capabilities.

To get this done, VISA proposed a system combining public key infrastructure with open-source technology. The credit card issuer explained that both components would allow users to send transaction messages without connecting to the internet. In part, it reads:

“Recipients can submit signed, offline payment messages to an authorized wallet provider with a guaranteed settlement of those transactions in order to withdraw funds from the offline payment system.”

The payment processor added that an offline CBDC system would create an experience akin to traditional cash. Instead of having paper in their pockets, however, users will still enjoy the benefit of digital, quicker payment processing. This system could be the key to achieving CBDCs’ primary objectives – banking the unbanked and creating a more vibrant economy.

As VISA acknowledged, all of this is still research. No code for such a system has been written, and work hasn’t started yet.

Internet-Free Payments are a Thing

While the company is bringing an innovative idea, it’s not exactly novel. Countries have been working on CBDCs for months, and several of them have focused on providing these assets without an internet connection.

In October, mobile phone manufacturer Huawei announced that its new flagship device, the Mate40 Series, would come with a hardware wallet for China’s upcoming digital yuan. As the announcement explained, the asset will be a prominent part of China’s digital evolution, and its wallet will provide optimal anonymity to holders.

The wallets are also set to feature dual transactions, which would allow users to complete transfers by merely touching two compatible phones. The feature will work without any internet connection too.

Japan is toeing a similar line. The Bank of Japan announced work on a digital yen test in October, explaining that it would focus on providing an asset that functions as a payment vehicle.

The report explained that the Bank is working on bolstering the asset’s ability to withstand network outages. With the country prone to natural disasters that can knock out utilities like internet access for days, the Bank hopes to test the digital yen’s operation in cases of “Force Majeure.”

Remember, all trading carries risk. Past performance is no guarantee of future results.

Jimmy has been following the development of blockchain for several years, and he is optimistic about its potential to democratize the financial system.