This article is from www.blocknews.com.br and the original article can be read here in Portuguese
The Central Bank of Chile, in line with what its peers around the world has been doing, deepens the discussions around the creation of a digital currency, or CBDC (Central Bank Digital Currency). In a report released yesterday (11), the Chilean monetary authority cites the enormous advance in the digitization of transactions and payments, with the incorporation of new technologies, as essential factors to open the dialogue around the CBDC with players from the public and private sectors.
Prepared by the Central Bank’s Digital Payments Working Group, the document points out that “the issuance of a CBDC would make it possible to maximize the benefits associated with digital transformation, while mitigating some of its risks”.
The discussion in Chile is in line with what is already happening in other Central Banks around the world and assumes that a CBDC could contribute to the development of a more competitive, innovative, integrated, inclusive and resilient payment system.
However, the report points out, “the design of a CBDC must be carefully analyzed, in order to avoid negative impacts on the functioning of the financial system and on the transmission of monetary policy, as well as the challenges that it entails in technological and institutional terms”.
Next steps
From now on, the Central Bank will start to work on the Bank’s capacity building and advance in the development of specific projects to test different designs. This process will include discussions with regulators, users and service providers to consider the implications that issuing a CBDC may have on the country’s payment system. All this dialogue with market agents should be published in a new report at the end of this year.
The Chilean Central Bank report uses data from the Atlantic Council to inform that at the end of 2021, 87 countries were studying to issue some type of CBDC, which represents a growth of more than 100% compared to May 2020.
The reasons for exploring digital currencies vary, according to BIS (Bank for International Settlements) data used in the document. The main reason given in countries where digital payments are heavily used is to create a digital version of money; in countries with lower penetration of digital payments, improving financial inclusion is cited as paramount; the other reasons are linked to the improved efficiency and resilience of local payment systems.