Central Banks Successfully Test Over 30 CBDC Use Cases, Including Offline Payments

An API layer could facilitate a wide range of central bank digital currency payment scenarios, a Bank for International Settlements and Bank of England experiment has shown.

AccessTimeIconJun 16, 2023 at 9:00 a.m. UTC
Updated Jun 16, 2023 at 9:25 a.m. UTC

A joint experiment by central banks has tested ways to connect monetary authorities and the private sector to facilitate retail digital currency payments, according to a new report released on Friday.

The experiment saw the London Innovation hub of the Bank for International Settlements – which groups the world’s central banks – and the Bank of England develop 33 application programming interface (API) functionalities to test more than 30 central bank digital currency (CBDC) use cases, including offline payments.

API software allows two or more computer programs to communicate and share data with each other.

“Project Rosalind” looked at how an API layer could support a retail CBDC and facilitate safe and secure payments through different use cases, said Francesca Hopwood Road, head of the BIS Innovation Hub London Centre, in a press release.

The Bank of England is currently consulting on a digital pound, which it has said will likely be needed in the future. The bank set out in its consultation that it would host the centralized ledger and the application programming interface (API) for a potential digital pound. The API would allow private sector firms to access the ledger and provide services such as automated payments.

“There is actually no shortage of different ways that the market might respond and engage with this,” Hopwood Road told CoinDesk in an interview, referring to Project Rosalind.

A diverse range of payment options were tested in this experiment such as online, offline and in-store payments via interactions with QR codes, mobile phones, smart cards and more, the report said. The project also explored the facilitation of micropayments.

“One use case that Rosalind was employed for was a child-parent wallet, and looking at how payments could be made in that kind of scenario – responsible spending, how parents can allocate pocket money to children, how that money could then be spent in different locations and all those different things,” Hopwood Road said.

The study also found that the API layer could work with different ledgers, she said.

In April, the BIS released a report on Project Meridian, also with the Bank of England, which successfully tested the use of distributed ledger technology in running interbank transactions.

The BIS seeks to experiment in different areas to help contribute to the “very important” CBDC conversation at the moment, Hopwood Road said. Jurisdictions are increasingly exploring the issuance of CBDCs and some countries like Nigeria and the Bahamas have already issued them.

“I think if you look across the range of experiments that we have done in the Innovation Hub, increasingly in the CBDC space, whether it's wholesale or retail, we are experimenting and exploring different dimensions, [such as] cross border, offline, security,” Hopwood Road said.

“I think these are all very important elements of CBDC exploration, and areas that we know central banks are increasingly focusing on and turning their attention to,” she added.

Blockchain network Quant announced its role as part of the vendor team for Project Rosalind on Friday. In a press statement shared with CoinDesk, Quant said it had partnered with digital solutions platform UST on the project, "with Quant providing the underlying infrastructure and blockchain platform, secure smart contracts and interoperability of central bank ledgers, and UST building the frontend Rosalind API layer."

UPDATE (June 16, 09:25 UTC): Adds that Quant was part of the vendor team on Project Rosalind in the last paragraph.

Edited by Sandali Handagama.


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Camomile Shumba

Camomile Shumba is a CoinDesk regulatory reporter based in the UK. She previously worked as an intern for Business Insider and Bloomberg News. She does not currently hold value in any digital currencies or projects.