The Riksbank, the central bank of Sweden, has published its final report on the digital krona pilot project. The report focuses on the experience of users and specifically examines offline functionality, with results that were a mix of positive and negative.
On March 20, the Riksbank released its fourth and final report on the e-krona. This report explored an alternative model for offline retail transactions compared to the one proposed in Phase 2 of the pilot. In the previous model, transaction information was stored on mobile phones.
The Riksbank is now considering the implementation of a “shadow wallet” in the online system, along with a payment card that acts as a stored-value card. Both of these elements were already part of the system design. The payment card would serve as the payment method and keep track of offline changes to account balances.
The report examined four different use cases: funding and defunding the payment instrument, offline payment at a point of sale (POS) using near-field communication, offline transfers between two cards, and imposing limitations on the balance and number of transactions on a card.
Communication between cards and between a card and a POS was done through mobile phones. However, due to concerns about the security of mobile phones, they were not considered to be secure components in the transaction process.
One challenge faced by the Riksbank was synchronizing payment cards. If the synchronization order was incorrect after a series of transactions, some shadow wallets could be left without liquidity. Counters were introduced to ensure that offline payments were synchronized in the correct order and to prevent replay attacks, where the same e-krona is used multiple times by the same party.
To ensure the security of instructions between payment cards and the intermediary (R3’s Corda platform), digital certificates were used. These certificates were self-signed, but trusted and verified infrastructure would be necessary before the system could be launched.
Sweden initiated research on the e-krona in 2020, and the Riksbank has committed to continuing its research on central bank digital currencies (CBDCs) in case legislation is enacted to introduce one.
In conclusion, the Riksbank’s final report provides valuable insights into the digital krona pilot project, focusing on offline functionality and the experiences of users. The report highlights both the potential benefits and challenges associated with implementing a CBDC like the e-krona.