Sweden’s Central Bank, The Riksbank, wraps up E-Krona pilot with focus on offline transactions

The Riksbank, Sweden’s central bank, unveiled its fourth and concluding report on the e-krona pilot project on March 20, presenting detailed insights into the digital currency’s offline functionality. 

This last phase of the project diverged from its Phase 2 proposition, which primarily used mobile phones for storing offline transaction data. The central bank evaluated an alternative approach incorporating a “shadow wallet” for the online system alongside a payment card. This card is designed to function both as a payment method and a tracker for offline balance adjustments.

The pilot explored four main use cases: loading and unloading funds to the payment instrument, conducting offline payments at points of sale via Near Field Communications (NFC), executing offline card-to-card transfers, and applying restrictions on the card’s balance and transaction volume. The shift towards a payment card solution aims to address the limitations of mobile phones in secure transactions, highlighting concerns over the security and user-friendliness balance in offline payments.

Technical challenges and security measures

The report identifies specific challenges in ensuring the seamless functioning of the digital currency system, particularly in offline modes. One notable issue is the synchronization of payment cards post-transactions to maintain the liquidity of shadow wallets. The proposed solution involves using counters to correctly sequence offline payments and prevent replay attacks, where the same e-krona could be misused in multiple transactions.

Additionally, the pilot addressed the need for pre-defined limitations on the transaction capabilities of the payment cards, suggesting that changes to these limits would require issuing new cards. Security protocols between payment cards and the intermediary platform, R3’s Corda, were fortified using digital certificates. Although these certificates were self-signed, the report emphasizes the necessity of a trusted and verified infrastructure for the e-krona system’s eventual rollout.

Initiated in 2020, the Riksbank’s thorough investigation into the e-krona demonstrates its commitment to comprehending and possibly adopting a central bank digital currency (CBDC). The knowledge acquired from this trial project enhances the bank’s continuous study, highlighting its readiness to move forward with CBDC research, subject to the necessary legal consent.