Central Bank Digital Currencies (CBDCs) are an option valued by many countries, one of which is Chile. The Central Bank has concluded its first evaluation of the benefits and challenges of issuing its own cryptocurrency.
According to a statement on May 11, the financial institution considers that a final decision to launch a digital currency requires a “deeper analysis of its costs and benefits.”
That means, At the moment, Chile will not have a digital currency, although it is being evaluated. The agency explains that it is important to compare a digital currency with other policy alternatives that are more defined and that address the same challenges, as recommended by the Digital Payments Working Group.
He also points out that designing a digital currency “must be carefully analyzed”, to prevent negatively impact the functioning of the financial system and on the transmission of monetary policy.
However, the Central Bank states that it is going to start working on the creation of internal capacities, so that they can test different designs of digital currencies.
The Digital Payments Working Group of the Central Bank of Chile was led by Alberto Naudon. Source: wikipedia.org.
Despite showing caution about digital currency, the Central Bank highlights the positive aspects of the issue of a CBDC. “It would make it possible to enhance the benefits associated with digital transformation, while mitigating some of its risks.”
The publication of the results of the first study was announced a few days ago by the head of the Central Bank of Chile, Rosanna Costa, as reported by LogitechGamingSoftware.
The characteristics that the digital weight of Chile must have
Regarding the Chilean digital currency, Costa also expressed what, in his opinion, should be one of the characteristics that it must have. One of them is that can be used for payments, both online and offline.
Likewise, he thinks that the system to be implemented with the CBDC should “allow the authorities to trace the transaction later”, while protecting the personal data of the users.
The president of the financial institution added that the digital currency must coexist and be convertible with cash and be used by commercial banks. Something that coincides with the text published by the central bank.
“The purpose of issuing a CBDC is not to eliminate or replace traditional means of payment, in particular cash, but rather to provide a means of payment that is complementary to the current ones,” the report states.
The first steps for development of a digital currency in Chile, were announced in September 2021. One of the reasons why they began the exploration of a digital currency was due to the “accelerated technological advance and the incorporation of new instruments and actors to the payment market”, it can be presumed that they refer to Bitcoin and the power that it has been concentrating in the world, something that concerns all traditional financial institutions.
A recent study by the Bank for International Settlements (BIS) determined that nine out of 10 central banks are exploring digital currencies and more than half are developing them or conducting concrete experiments.