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Central banks around the world have been steadfast in researching and developing central bank digital currencies (CBDCs) to keep up with the needs of the digital population. Chile is joining this trend, and it has described how its CBDC will work once it is launched.
The Chile central bank has previously said that it would commit to research and analysis about a CBDC before launching one. The country has said that for this purpose, the launch of the CBDC would delay.
The digital peso launch will wait
Banco Central de Chile released a report saying that it focused on the benefits and risks posed by a CBDC. The central bank noted that it was optimistic about the launch of this product, saying that it could provide economic growth and foster consumer protection.
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“A CBDC would contribute to achieving a competitive, innovative and integrated payment system that is inclusive, resilient and protects people’s information,” the institution said.
The central bank also said that a digital peso could be used as an alternative digital currency to private cryptocurrencies such as Bitcoin. According to the institution, private cryptocurrencies have a high risk of being used for criminal activities.
“The issuance of a CBDC is also a good alternative to face challenges associated with the potential massification of so-called currencies, which, although for now, they have a very small role in the payment system, could alter the functioning of the financial market and the transmission of monetary policy if its use becomes widespread,” the central bank said.
The bank’s governor, Rosanna Costa, noted that it could work both online and offline once this product is launched. She also said that authorities in Chile needed to create a system that could trace CBDC transactions. The Chilean digital peso should also be convertible to cash and offer secure transactions.
A boom in CBDC development
The development of a CBDC has become a priority for many central banks globally. A recent report from the Bank of International Settlements (BIS) said that 90% of central banks worldwide were working on developing this product.
Additionally, around 50% of these institutions are currently in the development or trial phase for this product. Countries leading in CBDC development include China, Malaysia and Thailand. Authorities in these countries have favoured CBDCs compared to private cryptocurrencies like Bitcoin.
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