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The Central Bank of Chile (BCCh) published the report “Issuance of a Digital Currency of the Central Bank in Chile”, in which it makes its first evaluation regarding the benefits and challenges that the issuance of a digital currency.
The interest of the BCCh in exploring the possibility of issuing Chilean pesos in digital format is framed in a context of increasing digitization of payments, which has been driven by rapid technological progress and the incorporation of new instruments and players in the payment market.
Project requires deeper Analysis
The Report highlights that the issuance of a CBDC would enable the benefits associated with digital transformation to be enhanced, while mitigating some of its risks. In particular, a CBDC could contribute to the development of a more competitive, innovative, integrated, inclusive and resilient payment system. However, the report concludes that a final decision on this requires a deeper analysis of its costs and benefits, as well as a more complete comparison with other policy alternatives that address the same challenges.
No internationally agreed standards
The Report also points out that, although several central banks in the world are analyzing the digital issuance of their respective currencies, for now there are few who have made the decision to issue it. The foregoing reflects that this is a process that takes time and for which there are still no internationally agreed standards or best practices. For now, the design of a CBDC must be carefully analyzed, in order to prevent 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.
In this context, the BCCh considers that it is necessary to start working now on building capacities within the Bank and advance in the development of specific projects that allow different designs to be tested. Likewise, the Report indicates that, due to the implications that the issuance of a CBDC could have on the payment system, its design requires the participation of all interested agents, including regulators, users and providers.
In line with the above, the BCCh will initiate a dialogue process with the community, which will include the organization of seminars to present and discuss visions regarding innovations in digital payment methods and the issuance of MDBC, as well as work tables with the different actors involved. The result of this process will be presented in a second report to be published
towards the end of this year.
Finally, it is important to mention that the issuance of a MDBC is not intended to eliminate or replace traditional means of payment, particularly cash, but rather to provide a means of payment that complements the current ones. Satisfying people’s demand for cash is and will continue to be a primary task of the Bank, which is not altered by this MDBC exploration process.