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It highlights major trade-offs in security, privacy, and policy that must be addressed before offline CBDC payments can scale. More complex risks, like counterfeiting and double spending, also need to be addressed to build trust. Once sent, funds are deducted from the payer’s device regardless of whether the payee ever receives them.
Account holders who provide authorization do not necessarily know when payees will withdraw the promised funds and may not remember to keep enough money in their accounts to cover the costs. Instant transactions require that money move immediately and irrevocably, and TCH states that supporting push payments only reduces fraud risks.
In the UK £250K can now be sent in a single, irrevocable payment – and the system has been tested for up to an eyewatering £10 million. When this kind of fraud takes advantage of an instant and irrevocable payment mechanism, losses will sky rocket. There are additional factors that mean that it’s not simple to address.
There’s financial risk, and making sure the payee who ends up in possession of the funds is the intended recipient. So fast that, once the funds are pushed, they are instantly usable to the payee who received them. The payment is irrevocable, and can’t be clawed back. There is no shortage of risks to consider, she noted.
In doing so, they can address the challenge of scale and turn the tide against fraudsters. Favoring speed and the irrevocability of transactions, real-time payments inadvertently aid the operations of APP fraudsters, who rely on the instantaneous nature to launder their profits, cover their tracks and evade the risk of being traced.
What’s more, these transactions are irrevocable, and as fraud losses mount, new questions surface over who holds liability to recoup funds. By definition, real-time payments give financial institutions (FIs) almost no time to analyze and authenticate a transaction to prevent fraud and other financial crimes.
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