Chile’s central bank has postponed the start of its digital peso rollout until the end of the year while it conducts more research to inform a new report.
The Central Bank of Chile has postponed plans for a central bank digital currency (CBDC), stating that the issuance of a digital Chilean peso necessitates a more thorough examination of the benefits and risks, promising a new report by the end of the year.
A report issued by the bank on May 11 included a preliminary evaluation of a Chilean CBDC as well as an examination of the country’s current payment system as well as the benefits, risks, and principles of issuing a digital peso.
While the current payment system “works adequately” and has “adapted well to recent challenges,” the bank stated that a CBDC would enhance and mitigate any risks of digital transformation, adding:
“A CBDC would contribute to achieving a competitive, innovative and integrated payment system that is inclusive, resilient and protects people’s information.”
Concerning the issuance of a digital peso, the bank believes there is insufficient information to make a final decision and will “carry out a series of seminars, presentations, and meetings with various counterparts” to inform the new report.
Chile’s central bank announced in September 2021 that it would develop a strategy with proposals and options for a CBDC rollout in early 2022, as well as form a working group to study the potential digital peso.
The bank expressed its concern about crypto adoption in the country, citing the potential for cryptocurrency use in money laundering and illicit activities, as well as the ability to disrupt banks’ access to funds if used as an alternative to bank deposits.
“The issuance of a CBDC is also a good alternative to face the challenges associated with the potential massification of so-called virtual 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.”
According to Statista, Chile ranks 18th in the world for cryptocurrency adoption in 2021, with 14 percent of Chilean respondents saying they owned or used cryptocurrency that year. Chile is also the fourth largest user of cryptocurrency in South America.
Chile does not prohibit the use and trade of cryptocurrencies, but it shares the concerns of other South American countries. Argentina’s central bank intervened in early May to prevent two of its banks from offering crypto services, citing the need to “mitigate the risks crypto poses.”
Brazil is also interested in regulation, with a bill that has been circulating since 2015 to establish a regulatory agency to oversee the crypto market moving closer to approval as of mid-April.
