May 24, 2022

Chile is exploring the possibility of creating its own digital peso

The Central Bank Digital Currency (CBDC) is a project being explored by many countries, among which is Chile. The country's central bank has released its first study on the advantages and disadvantages of creating its own digital currency.

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According to the Bank's announcement dated May 11, the financialthe institution believes that the final decision to issue its own digital currency requires "a deeper examination of the estimated costs and benefits."

This means that there are currently noa digital currency will be issued, but this issue is being actively discussed. The Central Bank notes that in accordance with the recommendations of the Working Group on Digital Payments, it is necessary to compare the state cryptocurrency with other alternatives that are more certain and have the same advantages.

It is also noted that the creation of a digital currency “should be carefully studied” in order to avoid a negative impact on the functioning of the financial system and on the conduct of monetary policy.

The central bank says it will startresearch on the creation of digital currency. The Central Bank demonstrates caution regarding CBDC, however, despite this, the regulator notes the positive aspects that the introduction of digital currency brings with it. “This will enhance digital transformation as well as mitigate some of the risks.”

Characteristics that Chile's digital peso should have

President of the Central Bank of Chile, Rosanna Costa,noted that, in her opinion, the state cryptocurrency should have a number of characteristics. One of them is the ability to use CBDC to pay both online and offline.

In addition, in her opinion, the CBDC implementation system "should allow the authorities to track transactions after they have been completed" in order to protect users' personal data.

Also, the head of the financial institution added that the digital currency should exist in parallel with the fiat currency and be easily convertible, and besides, accepted by commercial banks.

“The issuance of the CBDC is not intended to crowd out orreplacing traditional payment methods, in particular cash, and is aimed at creating an additional payment method, ”the Bank said in a statement.

The first steps towards establishing a CBDC in Chile weretaken in September 2021. One of the reasons for the start of research on the creation of a digital currency was "the emergence of advanced technologies, as well as the introduction of new tools and the emergence of new players in the payment market."

A recent study by the Bank Internationalcalculations (BIS) shows that nine out of ten central banks are conducting research on the creation of digital currencies, and more than half of them are already carrying out specific experiments.

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