The European Central Bank (ECB) is exploring options for an offline digital euro as part of its retail central bank digital currency (CBDC) work. Currently, it wants to understand the marketplace for using an embedded Secure Element (eSE) and embedded SIM (eSIM) of end user devices.
Secure elements are standard-compliant chips that ensure the safe storage of important data. Most smartphones and many wearables have them and they’re typically used for payments amongst other functions.
Modern iPhones and many other phones have an embedded SIM. That means if you want to switch your mobile network, the SIM is updated using software, rather than a physical replacement. This has to be super secure, hence the interest in using it for offline CBDC payments.
One of China’s offline digital yuan options uses smart SIMs, which are physical SIMs with extra circuitry, allowing users to transfer between their main wallet and the SIM wallet. However, some phones, including the iPhone 14 and 15, no longer support physical SIMs, so the functionality would need to be incorporated in the eSIM.
Vodafone’s PairPoint and China Telecom have both developed smart SIM cards that support blockchain, with PairPoint eyeing bank payments. PairPoint’s original target was to combine it with an IoT device rather than a smartphone.
The invited experts
The ECB is inviting experts in three fields to participate in conversations in the second half of September.
- Original Equipment Manufacturers (OEMs) of mobile devices
- Mobile Network Operators (MNOs)
- specialised Trusted Service Managers (TSMs), facilitating the deployment of Service Provider applets from various industries.
However, the ECB has some ongoing tenders, and any participant in the talks cannot take part in a tender offer.
That could be tricky. Giesecke+Devrient is one of the few large providers of offline CBDC solutions. It is also the operator of the most commonly used eSIM management platform, which enables the switching of SIMS between MNOs.
Meanwhile, in April the ECB gave an update on its offline digital euro work. It is currently targeting three hardware devices – a prepaid card, a smart card (debit card with a chip) and smartphones.
When the central bank published digital euro tenders, the offline aspect had by far the largest budget, with a maximum value of €662 million (€714m).
