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Temenos extends digital currency innovation; demonstrates CBDC wallet capabilities

Temenos continues to innovate in preparation for the digital currency future and has now successfully demonstrated consumer CBDC wallet capabilities built with the Temenos banking platform

Jeremy Boot
Blog,
Jeremy Boot – Product Strategist

Central banks globally are progressing with their CBDC projects. A frequent requirement for retail CBDC is the provision of private sector digital wallets for consumers, providing a secure way to obtain, hold, and spend digital currency.

Though it is likely we will see a variety of wallet providers, commercial banks are expected to be key players due to their anticipated role as primary CBDC distributors (much like for cash today), offering direct integration to the existing financial system through deposit account conversion, supported by their operational capability, large customer bases, and brand trust. This observation is borne out by countries such as China and India running CBDC pilots with digital wallet apps provided by leading commercial banks in collaboration with the central bank.

With this latest episode of our innovation series looking at how Temenos is exploring the future world of digital currencies, we are delighted to share how the Temenos banking platform can be used to support CBDC wallets.

For this latest proof-of-concept we built on top of earlier work which showed how banks running the Temenos platform can integrate with CBDC platforms such as Hyperledger Besu and R3 Corda. We have now executed an additional set of use cases across secure non-custodial wallet opening from a mobile app built with Temenos Visualiser, transaction signing to fund wallets from deposit accounts integrated to the platform, management of offline payments, and synchronisation of transactions with the core ledger via the Temenos fulfilment service layer.

We demonstrated several key use cases, including how we could securely create a new wallet, generating a private key within the Temenos Visualiser app runtime and using the phone’s secure enclave to generate a cryptographic key with which to encrypt it. This key remained shielded and inaccessible outside the enclave, ensuring it was safeguarded against external threats. Only non-sensitive data such as the public key and account identification details left the mobile device and were sent to the fulfilment service.

Offline payments are a key requirement for many central banks. There is much industry exploration and various technical challenges to be overcome. The BIS (Bank for International Settlements) project Polaris: handbook for offline payments with CBDC lay’s out a vision for different types of offline payment approach. In this proof-of-concept we chose to evaluate one of these models, and successfully demonstrated staged offline payments where one or both parties synchronise transactions with the core ledger to settle value transferred offline.

We chose to implement contactless payments using near field communication (NFC). In the context of the PoC, one mobile device operated as a Host Card Emulation (HCE) device, while a second functioned as an NFC reader. We showed how we could exchange cryptographically signed transaction data between mobile phones without the need for an internet connection.

Both devices retained offline transaction records locally in addition to tracking settled and unsettled balances. Keeping a secure, local record of the available balance is key to avoid double spending. To settle transactions one of the devices synchronised with the core ledger via our fulfilment service. Once the transaction was confirmed and settled the available balance was updated within the mobile wallet and the value liberated for future use.

Through this proof-of-concept we have demonstrated the capability of the Temenos banking platform to support a variety of CBDC wallet features, including offline payments based on one of the standard BIS models. Other models may be examined subsequently.

Temenos has now demonstrated how its platform can support a complete end-to-end vision of retail CBDC, that includes the simulation of issuance, distribution, and exchange of CBDCs between central banks and commercial banks, and now also consumers’ digital wallets.

Stay tuned for more exciting innovation as we continue to explore the brave new world of digital currencies, assets, and tokens, paving the way for banks running the Temenos platform to succeed in this new monetary era.

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Jeremy Boot