Offline Payments Using CBDCs. Is that the revolution of sending money to Vietnam or not?

Offline Payments Using CBDCs. Is that the revolution of sending money to Vietnam or not?

CBDCs is no longer a strange concept for financial technology people recently when this wave started in the Bahamas in October 2020.

Up to now, its applicability in practice is still a huge question mark for high-ranking officials of countries around the world.

In this article, let’s find out with FinFan what CBDC is and is a revolution of sending money to Vietnam or not.

First, let's find out what CBDC is.

According to the McKinsey & Company site definition, Central bank digital currencies (CBDCs) are the digital form of a government-issued currency that isn’t pegged to a physical commodity.

They are issued by central banks, whose role is to support financial services for a nation’s government and its commercial-banking system, set monetary policy, and issue currency.

Examples of central banks include the US Federal Reserve System, the Bank of Japan, the People’s Bank of China (PBOC), and Germany’s Deutsche Bundesbank.

How do the central banks of nations in the world respond to offline payments using CBDCs?

According to the most recent survey by the Bank for International Settlements (BIS) Innovation Hub Nordic Center on the question of whether CBDC can be used in offline retail payments, 49% said it is essential, 49% think it is a great opportunity, only 2% disagree or disagree with the above issue.

*Although there is still some disagreement due to concerns about security, privacy, likely risks, the types of solution, their maturity and applicability, there is no “one-size-fits-all” solution, the paper says, and each country has different reasons for providing offline payments with CBDC.

This means that the types and forms of offline payments will vary from one country to another depending on their objectives and local requirements.

There are three modes of offline payments:

  • The fully offline mode, which allows payments to be completed and settled without the need to connect to a ledger.
  • The intermittently offline mode, which, like the fully offline mode, enables the payee to spend the value received at the end of the transfer, but which imposes transaction limits and requires synchronization with the central system intermittently.
  • The staged offline mode, where value exchange takes place offline requires a connection to settle on the payee side and for the value transferred to be spendable.

These modes have different implications for risk management, the level and type of privacy provided, and the resilience conditions that are supported, the paper warns.*

*Sourced by Switzerland Fintech News

Is CBDC the revolution of sending money to Vietnam and offline payments or not?         

Although up to 98% of the opinions agree that CBDC is an offline payment method of the future and can be completely recognized. However, according to FinFan, if Vietnam is present in that survey, it will be in the remaining 2% due to several reasons:

  • Concerns about information security policy and the rapid development of technology that can lead to fraud. Currently, when the issues of blockchain and cryptocurrencies have not been approved by the law as well as the state bank of Vietnam, there have been many money scams happening through new technologies such as blockchain and AI.
  • If the law and the state bank pass, the state bank will act as the central ledger for all transactions. At that time, they will still control the entire process of exchanging and transferring money from abroad to Vietnam as well as paying expenses through CBDC. This forced the state bank of Vietnam to establish a new coin, VNDC, to conduct all transactions. This will take quite a while.
  • In some highland and rural areas in Vietnam, the rate of using feature phones is still higher. This situation will significantly affect the digital transformation process in sending and receiving money from abroad to Vietnam as well as paying some international bills using CBDC.

Although there are still some difficulties and obstacles preventing the acceptance of CBDC as an offline payment method and receiving money from abroad to Vietnam.

However, CBDC is still the most likely way to change the old ways of receiving and sending money.

Moreover, the rate of Vietnamese people knowing about and owning cryptocurrencies is always in the top 10 countries in the world. Because of that, the adoption and acceptance of CBDC will be a real revolution for offline payments and sending money to Vietnam.