Last week the President of the Central Bank of Chile, Mario Marcel, spoke at length about the potential for a central bank digital currency (CBDC) at a seminar organized by the Chilean Ministry of Finance and the Inter-American Development Bank (IBD).
One of the primary motivations for a CBDC in Chile is the promotion of financial inclusion. Like many developing countries, a reasonable proportion of Chile’s citizens are unbanked.
Currently, this stands at 26% of its 19.1 million population. This may be due to high costs of financial services, travel time to branches, lack of identity documents, or poor trust in institutions.
As a digital form of cash, a CBDC would help make cash more accessible and enable the population to participate in Chile’s growing e-commerce economy.
When it comes to payment services, speed, efficiency, stability and security are all major points of consideration for the central bank. A CBDC will eliminate the need for a bank account, requiring a smartphone or other digital wallet.
Chile is still in quite an early stage of its CBDC research, though it seems ambitious and open to exploring various features. At this stage, the central bank’s emphasis is on exploring payments as a whole, including retail, cross-border and wholesale payments. From this, it will decide about potential use cases for a digital peso.
Stablecoins were another point of discussion during the seminar. Marcel spoke at length about the potential of stablecoins for payment facilitation in the country, picking up primarily on the advantages afforded by its stability of value.
To carry out further research into these issues, a working group has been established to explore both payments and a CBDC. The central bank is working on a white paper with a framework for action and strategic objectives, which it plans to release in the first quarter of 2022.
Meanwhile, last week the Royal Monetary Authority of Bhutan announced it is partnering with Ripple in the first stage of its CBDC pilot. Turkey is also ramping up its interest in a digital Lira, having signed agreements with major domestic technology stakeholders.