Central Banks, Secure Elements And Digital Currency

Dateline: Singapore, 30th July 2024.A board member at the European Central Bank (ECB), Piero Cipollone, wrote to Thierry Breton, the European Commissioner for the internal market, to warn that Apple’s current plans are likely to make the iPhone incompatible with making offline payments in any future European central bank digital currency (CBDC). If you want to know why this is, well, read on…ShareThe ProblemMr. Cipollone rightly notes that Apple’s proposed commitments to the European Commission would not give third parties full access to the secure element (SE) in the iPhone, but only allow for what is known as host card emulation (HCE). Let’s break this down before we move on to look at the implications.First, the SE. The SE is a secure computer chip in the handset that is much the same as the secure computer chip on a credit card and, much the same as the secure computer chip on a credit card it can store the cryptographic keys need for (for example) Visa or MasterCard payments. If you cannot store these keys in the SE, then you have go to some lengths to protect them inside the memory of the phone itself.Second, HCE. HCE-based payment solutions allow banks to build their own apps to compete with Apple Pay, but these apps would be at a fundamental disadvantage against Apple Pay, as they would be unable to hold the necessary secure data inside the SE. Which means that banks, and other organisations, can build retail payment applications on the standard…Central Banks, Secure Elements And Digital Currency