2021-3: "Why a Digital Euro should be Online-first and Bearer-based " published
We are happy to announce the publication of our paper on "Why a Digital Euro should be Online-first and Bearer-based".
The European Central Bank’s “Report on a Digital Euro” considers two distinct types of designs for a digital euro. It argues that all functional requirements laid out in the report can be fulfilled by operating the two systems in parallel:
- A bearer-based digital euro based on trusted hardware that can be used offline, anonymously, and without third-party intervention.
- An account-based digital euro that can be used online, is fully software- based and excludes the possibility of anonymity.
We argue that operating a bearer-based payment system to complement an account-based CBDC in order to gain offline and privacy features is not a good trade-off. Adding permanent, regular offline capabilities via the bearer-based payment instrument constantly exposes the CBDC to the severe issues inherent in offline-capable payment systems. Instead, the offline mode of operation should be restricted to scenarios where it is actually required, which mitigates the risks.