- Chile is considering designing a CBDC which, according to Rosanna Costa, Governor of the Central Bank of Chile, would have to accept offline payments in order to be launched on the market.
- The Bank of International Settlements assured that nine out of 10 national banks are behind the possibility of issuing their own assets.
Given the advancement of cryptocurrencies, which are gaining more and more ground around the world, governments fear for the power of their assets and that is why they approach the digital field.
Chile is the latest example and announced that it is considering designing a Central Bank Digital Currency (CBDC) and according to the Governor of the Central Bank of Chile, Rosanna Costa, the currency would have to accept offline payments in order to be launched on the market.
The president pointed out that it is likely that a final decision will not be made “on the issuance of a digital form of the Chilean peso” and in any case it could not happen in the short term, since she considered that “it is not necessarily efficient today.” Although the pilot tests, which will have the backing of the public and private sectors, could begin to be developed at the end of this year.
How will the Chilean CBDC work?
Costa gave more details on how it should work the CBDC by ensuring that the system it should “allow the authorities to trace the transaction afterwards”. This would mean that every movement would be recorded, although personal data would be saved.
Digital weight does not mean the death of cash. The governor assured that both fields will be able to coexist and that it would be a new opportunity for the local population.
Countries make their way to CBDCs
Chile’s thinking is on the agenda of other South American nations, such as Argentina and Uruguay. In Europe, the European Union is studying “how to balance the ability to conduct discreet cash-like transactions with the need to track illicit financing,” as developed CoinDesk. It is also analyzed, for small purchases, offering “more private means of payment”.
Ravi Menon of the Monetary Authority of Singapore does not think that focusing on retail CBDCs is the right choice as there are enough options. He understands that governments have bigger issues to worry about.
“We are barking up the wrong tree with retail CBDCs“, he assured, and added: “The tree we should be barking at is that of wholesale CBDCs for cross-border payments”. Menon said that the famous Swift service is “laborious” and “archaic”.
One of the great impediments to the application of CBDC is the opposition of the International Monetary Fund (IMF). This body, which has great control over the debtor countries, disagreed and this marks the agenda of many territories.
The speaker was Tobias Adrian, Director of the IMF’s Capital and Money Markets Department:
“In many countries with weak institutions, citizens may have incentives to move money out of the country. The vast majority of countries have some form of capital control, and there is direct and anecdotal evidence that crypto assets are used for that”.
Although Chile is the latest country to announce such a program, Bank of International Settlements, an organization that belongs to central banks, said that nine out of 10 national banks are behind the possibility of issuing their own assets. Regardless of intentions, banks have design problems.
When will Chile launch its digital currency? There is still no exact date, but it is clear that the South American country is behind it. There may be more news in the coming months.
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