Bank of Canada Staff Working Paper 2021-67: 'Best Before? Expiring Central Bank Digital Currency and Loss Recovery'

'Best Before? Expiring Central Bank Digital Currency and Loss Recovery'

Charles M. Kahn, Maarten R. C. van Oordt and Yu Zhu

The ability of payments using cash to continue when there is no electricity, network connection or other disruption to the electronic payment infrastructure and systems is a challenge for a CBDC to replicate. An offline ability to use CBDCs could make them more inclusive for those who find the digital world hard to access. This paper considers whether an expiry date on CBDCs would add to the usefulness of CBDCs.

The concept

If cash is lost or damaged, reimbursement is rare. If a CBDC is held off-line and there is no expiry date, then that off-line CBDC can be lost in the same way as cash can be lost. A CBDC offers the opportunity to introduce an expiry date for online balances and to automate personal loss recovery.