Chile’s Central Bank Postpones Decision on Its CBDC

The issuer prefers to wait for a clearer and more in-depth analysis of the implications for the financial system.
The CBDC “could contribute to the development of a more competitive and innovative payment system,” the bank notes in an evaluation report.

Chile’s central bank will make a decision on the launch of its digital currency (CBDC) in early 2023, announced the president of the issuing body, Rossana Costa, in a report on the benefits and challenges of this project published on Thursday.

The Minister of Finance and Council of the Central Bank, Mario Marcel, reported on the formation of a working group at the highest level that will be in charge of developing a strategy for the issuance of the “digital peso” that seeks to meet the needs and demands from an “increasingly challenging payments industry,” published by Reuters.

“Based on objectives linked to the needs of the public, financial stability and the effectiveness of monetary policy, the Central Bank will define, at the beginning of 2023, a proposal with options and requirements for an eventual issuance of a digital peso in Chile," commented the official before the legislators.

Some 40% of Chilean consumers use daily digital payments, Marcel said. Either through instruments such as debit or credit cards and bank transfers or any other form of payment, including cryptocurrencies.

“A more competitive payment system”

The report entitled “Issuance of a Digital Currency of the Central Bank of Chile,” will serve to enhance the benefits associated with digital transformation and minimize certain associated risks, the newspaper El Mercurio published citing the document.

The CBDC "could contribute to the development of a more competitive, innovative, integrated, inclusive and resilient payment system."

The report prepared by the Central Bank’s Digital Payments working group, headed by counselor Alberto Naudon, showed that before making a final decision, it is necessary to carry out a deeper analysis regarding the costs and benefits of the digital peso.

Also, it is necessary to analyze other projects currently underway around the world to learn about new options and how the challenges presented by the issuance of a digital currency are addressed.

“This Is a Process that Takes Time”

In conclusion, the report indicates that although several dozen central banks globally plan to launch a CBDC, “for now, few have made the decision to issue it.”

That "reflects that this is a process that takes time and for which there are still no internationally agreed standards or best practices," the document adds.

"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."

On The Flipside

Central bank digital currencies are centralized payment instruments controlled by governments, unlike cryptocurrencies such as Bitcoin or Ether, whose governance in the blockchain is private and depends exclusively on users.