- The Government of Mexico revealed that Banco de México, or Banxico, will have its own digital currency in circulation by 2024.
- CBDCs can simplify the implementation of a country’s monetary and fiscal policy, but they can also promote the financial inclusion of an economy.
The Central Bank of Mexico decided to start 2022 by announcing that by 2024 it will launch its own digital currency, better known as a CBDC (Central Bank Digital Currencies, in English).
On December 29, the Twitter account of the The Government of Mexico revealed that the Bank of Mexico, or Banxico, “will have its own digital currency in circulation” by 2024.
Likewise, the Government of Mexico reported that Banxico considers “These new technologies and state-of-the-art payment infrastructure are extremely important as options of great value to promote financial inclusion in the countrys “.
What benefits could adopting a CBDC bring?
A CBDC refers to the virtual form of a fiat currency, that is, it is the digital token of the official currency of a country; in this case, the Mexican peso.
It is generally believed that CBDCs can simplify the implementation of a country’s monetary and fiscal policy, but they can also promote the financial inclusion of an economy. This last aspect is fundamental given that it is a problem faced by many economies in the world.
According to the Development Bank of Latin America (CAF), a study by the International Monetary Fund revealed that the broader process of financial development promotes economic growth. Likewise, the CAF ensures that it has been shown that financial inclusion reduces income inequality, but, in addition, it is associated with the alleviation of poverty.
However, the question is: Could CBDCs really promote a country’s financial inclusion? Answering this question can be complex, especially when you consider that the use cases are limited.
Even so, there are studies that have tried to evaluate what the adoption of a CBDC would be like, especially in the case of Latin America. In this sense, a research work conducted by Noelia Cámara, Enestor Dos Santos, Francisco Grippa, Javier Sebastian, Fernando Soto and Cristina Varela from BBVA Research found that the adoption of the specifically universal CBDC would imply improvements in the levels of financial inclusion, in addition to reducing transportation costs and cash management. However, according to research, an adoption of such a CBDC creates some uncertainty.
Mexico throws itself into the abyss of the CBDC
So now the question is: How will the implementation of a CBDC be in the case of Mexico?
The Deputy Governor of Banxico, Jonathan Heath, explained in a recent videoconference organized by S&P that The launch of a CBDC will not reduce the predominant role of paper money, reported the publication of The CEO, therefore, Mexico’s CBDC does not seek to displace the country’s banknotes and coins.
Although all the details regarding this CBDC are unknown, Mexico joins Brazil and Peru as countries in Latin America that are working on developing a digital currency, however, they are not the only ones.
According to a report by Atlantic Council CBDCs already circulate in nine economies. But, in addition, 14 economies are piloting CBDCs and 16 economies are already in the development phase.
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