Central Bank Digital Currencies (CBDCs) are gaining momentum as more governments hop on to the digital money wagon. Chile’s central bank announced yesterday that it is preparing to launch a strategy for the potential roll-out of its own digital currency by early 2022.
Chile authorities appear pro-CBDC
According to Reuters, the central bank president, Mario Marcel recently explained Chile’s CBDC plan in a presentation before the legislators. He noted that the bank has organized a high-level working group to study a medium-term strategy for minting a “digital peso” to facilitate the requirements of an “increasingly challenging payments industry.” Marcel clarified that the high-level working group will not only critically analyse and evaluate the risks to Chile’s banking system but will also be responsible for determining the efficiency of its monetary policy.
“From objectives linked to the needs of the public, financial stability and effectiveness of monetary policy, the Central Bank will define, at the beginning of 2022, a proposal with options and requirements for a eventual issuance of a digital peso in Chile,” Marcel told lawmakers.
Furthermore, Marcel highlighted the hike in digital payments methods utilization in the country, with over 40% domestic consumption payments being made through credit cards or similar systems, along with digital transfers.
CBDC Vs Traditional Fiat
As CBDC gain policymakers’ attention, it is also raising concerns amongst the citizens who are worried that CBDCs could potentially enforce replacement of the traditional fiat. However, the European Central Bank Governing Council member, Jens Weidmann recently argued against it, claiming that CBDC adoption does not mean the traditional fiat system is going to be an “endangered species”. Weidmann further argued that CBDCs could push for healthy competition among financial institutions and institutions do not need to demand additional protection.
“CBDC should be designed in a way that allows its users to reap its potential benefits as fully as possible while keeping its risks and potential side effects at bay,” the Bundesbank president said at a conference on Tuesday. “This does not call for banks to be protected like an endangered species.”