Offline CBDC Payments: How Offline e-Rupee and Digital Euro Work

Picture a weekly haat in a hill block of Uttarakhand, where the nearest mobile tower sits behind a ridge and a UPI payment spins for a minute before failing. Cash still rules there, not out of habit but because it works without a network. Offline central bank digital currency is an attempt to copy that one property of cash into a phone or a card, and it turns out to be the hardest engineering problem in the whole CBDC project.

Why central banks keep coming back to offline

An online payment, whether UPI, a card or an online CBDC wallet, depends on a server confirming that the money exists and has not already been spent. Remove the network and that check disappears. Offline CBDC is the set of tricks that lets two devices settle a payment between themselves and trust the result.

Central banks rate the feature highly. A survey by the BIS Innovation Hub Nordic Centre for its Project Polaris handbook on offline CBDC, published in May 2023, found 49% of central banks saw offline payments with a retail CBDC as vital and another 49% saw them as advantageous. The reasons cited were resilience, inclusion, privacy and resemblance to cash. The same handbook warns that there is no one-size-fits-all design.

The appeal is easy to see in India. The RBI's own explanation of its February 2024 decision, as reported by Business Standard, was to enable transactions in areas with poor or limited internet connectivity, testing proximity and non-proximity solutions across hilly, rural and urban areas. The RBI's 2024-25 annual report presented offline capability as a highlight aimed at rural, disaster-hit and low-connectivity areas, which is also why it matters for digital cash in disaster relief.

How a device-to-device payment works

Strip away the branding and most offline designs follow the same five steps.

1. Load while online. The user moves value from a bank account or online wallet into an offline store on the device. The European Central Bank's first digital euro progress report describes pre-funding via the internet or at a designated ATM.
2. Hold value in protected hardware. The balance lives in a secure element, a tamper-resistant chip similar to the one in a bank card or SIM, so the user cannot simply edit the number.
3. Pay by proximity. Two devices talk directly, typically over NFC or Bluetooth. The sender's chip reduces its balance and signs a transfer; the receiver's chip checks the signature and increases its balance.
4. Keep the record local. In the ECB design, transaction data stays on the two devices and is not sent to a central system.
5. Reconnect and reconcile. When a device goes back online, it can refresh its keys, report counters and, for the receiver, move value back to an online account.

Every serious design worries about step three. If a chip is cracked, a fraudster could pay the same tokens twice to two shopkeepers who have no way of knowing. As a Ledger Insights summary of Polaris put it, double spending and counterfeiting are easier in the absence of online checks. That is why every offline design comes with limits.

What the RBI is testing for the offline e-rupee

India's thinking goes back to the RBI's October 2022 concept note, which called offline functionality important for inclusion and proposed to contain double-spending through technical measures and monetary limits on offline transactions. Since 2024, the pilot has tested several approaches. An RBI HaRBInger post, cited by Upstox in September 2026, invites solutions that enable offline e-rupee transactions using Bluetooth and NFC. One approach uses NFC on merchant point-of-sale terminals; another works without internet but still needs telecom signal, which helps where mobile data is weak but voice and SMS work.

The RBI has not published offline limits specific to the e-rupee. It has, though, a template. Its framework for small-value offline digital payments, which covers cards, wallets and mobile devices and was last updated in December 2024, caps offline payments at ₹500 per transaction and ₹2,000 outstanding per instrument, with UPI Lite at ₹1,000 and ₹5,000. Replenishing the limit requires an online transaction with additional authentication. It would be surprising if offline e-rupee ended up far from that range, at least at first.

There is also a link to programmability. The same February 2024 announcement that brought offline e-rupee brought programmable use cases, and the rural schemes where offline matters most are often the same ones where a state wants to fence money. We cover those in programmable e-rupee use cases.

The ECB's offline digital euro: the privacy pitch

Europe's offline design is built around privacy rather than connectivity. The euro area has good mobile coverage; what it has lacked is a digital payment that feels as private as a banknote. The ECB's progress report says that for offline payments only the two parties would know the personal transaction details, with no data shared with payment service providers, the Eurosystem or support providers. It calls this a cash-like level of privacy.

Politics has kept offline at the centre. The Council of the EU agreed its negotiating position in December 2025, backing a digital euro usable online and offline with a high degree of privacy, according to a Lewis Silkin note. Parliament's lead negotiator, Fernando Navarrete, had gone further in an October 2025 report, suggesting an offline-only digital euro unless the private sector failed to deliver a pan-European payment solution. The ECB rejected that idea, with an adviser arguing that offline alone would not let consumers shop online or send money over distance, Cyprus Mail reported. Parliament's committee position of June 2026 kept offline payments in the design and made them free of fees.

The ECB is candid that the hardware question is open. Offline phone payments depend on access to the NFC antenna and the secure element, which on some phones is controlled by the handset maker, and the progress report says that access depends on the legislation. The ECB is also studying cards with no battery that work through a bridge device. For the broader euro project, see the digital euro explained.

China's e-CNY: "touch one touch" since 2020

China has run offline e-CNY payments in public for longer than anyone. In a December 2020 Suzhou pilot, a group of recipients of 200 yuan red envelopes could test an offline wallet and make "dual offline" payments, where neither side has a connection, by tapping phones together, according to NFCW. Only designated phone models could take part.

Hardware came next. A 2021 China Daily report described e-CNY hardware wallets from a Shenzhen cash-machine maker in three forms, a display card, a shaped wallet and a SIM-based film, which pay by tapping a terminal. The People's Bank of China's white paper said these rely on security chips and can be built into IC cards, phones, wearables and other devices. That breadth matters because, as UCL's Geoffrey Goodell notes in a paper on hardware wallets, the global median smartphone cost US$92.59 in 2024, about 11% of global median income per person. A card is cheaper than a phone. We cover the wider programme in China's e-CNY.

The three designs side by side

Worked example: why the limits are low

Suppose an offline e-rupee wallet launched with the same ceiling the RBI uses for other offline instruments: ₹2,000 held offline and ₹500 per payment. These numbers are an assumption for illustration, not an RBI rule for CBDC.

• A farm worker loads ₹2,000 into the offline wallet before leaving town. At the haat he pays ₹40 for tea, ₹180 for vegetables and ₹60 for a shared jeep. His chip now shows ₹1,720. Nothing has touched a server.
• The vegetable seller takes 14 such payments during the day, averaging about ₹120, so she ends the day with roughly ₹1,680 received offline. If her own offline cap is also ₹2,000, she must reconnect and sweep funds to an online wallet before she can take much more.
• Now the attack. If someone cracks a chip and spends its ₹2,000 twice, the most a single device can create is ₹2,000 of bad money. Even an industrial fraud on 100,000 devices would cap out at ₹20 crore (100,000 × ₹2,000), detectable when receivers reconnect.

That is the trade. Each extra rupee of offline limit makes the wallet more useful and the worst case more expensive. It also explains why designers want devices to reconnect regularly: counters can be checked, compromised keys revoked, and bad tokens traced to the device that minted them. A design that lets a device stay offline for weeks with a large balance is a design that accepts a bigger fraud budget.

Offline CBDC is cash with a fraud budget. The size of that budget is a policy choice, not a technical detail.

Privacy and double-spend controls pull against each other

Here is the uncomfortable part. The strongest defence against double spending is to see every transaction eventually, which is how online systems work. The strongest privacy is to see none. Offline designs sit somewhere in the middle, and where they sit is a choice.

The Polaris research found that 44% of central banks believe offline CBDC should offer more privacy than online. The ECB has gone furthest by saying offline payment details stay between the two parties. India's concept note frames privacy as "managed anonymity", with small payments more private than large ones, which fits naturally with low offline caps: if each offline payment is small, more anonymity is easier to defend. For the full argument, read our piece on the CBDC privacy debate.

Liability is the other quiet question. If a merchant accepts a token from a cracked device, who eats the loss: the merchant, the wallet provider, or the central bank? Europe has flagged offline liability as one of the issues the ECB must settle before launch. Users deserve a clear answer in plain language before they are asked to trust an offline wallet with real money.

What to watch next

• Late 2026: EU trilogue negotiations on the digital euro regulation aim to conclude by the end of the year. The final text will set how offline holding limits are fixed and whether phone makers must open NFC and secure element access.
• Second half of 2027: the ECB's planned 12-month pilot, if the regulation is adopted in 2026, is the first chance to see offline digital euro payments with real users.
• 2026-27 in India: the RBI plans to extend CBDC pilots to more DBT schemes and retail use cases. Watch whether offline limits for the e-rupee are published, and whether any state uses offline wallets in a scheme that reaches places UPI does not.
• 2029: the ECB's target for a potential first issuance of the digital euro, assuming legislation is in place.

We set the three currencies against each other in e-rupee vs digital euro vs e-CNY.

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