Chilean Digital Peso Would Need to Work Offline, Central Bank Governor Says
Chile’s central bank digital currency (CBDC) would need to accept offline payments, the central bank governor said at an event on Tuesday. Governor Rosanna Costa promised a policy paper on the topic later this week but added that no final decision had been taken on whether to issue a digital form of the Chilean peso. “
What we’re looking at is the possibility that our CBDC can also be used for payments in cases where there is no connectivity, for example in rural areas,” said Costa, according to a report by Reuters. Chile has been exploring the possibility of issuing a digital currency since 2018, and Costa’s comments come as the central bank looks to update its monetary policy framework.
The Chilean peso is currently the only currency in South America that is not pegged to the U.S. dollar, and Costa said that the central bank was “very attentive” to developments in other countries’ CBDC plans. She added that the bank was also monitoring private sector initiatives in the space. “We are very open to learning from the experiences of other countries, as well as from the experiments that are being carried out in the private sector,” Costa said.
The central bank governor’s comments come just days after the head of the country’s stock exchange announced plans to launch a digital currency platform. The Santiago Stock Exchange (SSE) said that the platform , called Digital Currency Exchange (DCE), would be used to trade a range of assets, including cryptocurrencies.
The SSE said that the platform would be open to both retail and institutional investors and that it would use blockchain technology to record transactions. The exchange added that the platform would be regulated by the Chilean financial regulator, the Superintendencia de Valores y Seguros (SVS).
While the SSE’s announcement was met with some skepticism, it is clear that there is interest in launching a digital currency in Chile. And, as governor Larrain said, any such currency would need to be able to work offline.
The Chilean peso has been one of the worst-performing currencies this year, losing around 15% of its value against the US dollar. The country’s central bank has been trying to prop up the currency by selling dollars and buying pesos in the foreign exchange market.
A recent survey from BIS shows that 9 out of 10 central banks are looking into how to launch their virtual assets. The major reason was to be able to compete with the likes of bitcoin.
The CBDC should “should operate both online and offline,” Costa said at an event hosted by the Swiss national bank, adding that the technology to do so was “not necessarily efficient today.”
The system should “allow the authorities to trace the transaction afterward,” while safeguarding personal data, Costa said.
In jurisdictions such as the European Union (EU), officials are considering how to balance the ability to make discreet cash-like transactions with the need to track illicit financial activities.
According to Costa, the use of cash in Chile has dropped sharply in recent years and is now about 3% of all transactions, down from about 20% a decade ago.
In an interview, Costa said the best model for a digital version of the Chilean peso would likely be one that works offline, similar to the e-franc being developed by Switzerland, which is also looking at how to reduce its reliance on cash.
While the Chilean peso is not a reserve currency like the Swiss franc, its central bank has been gradually accumulating foreign exchange reserves, which hit a record $65 billion in September.
Costa said the central bank was monitoring developments in other countries but had no immediate plans to launch its own digital currency.
“We are following with interest what is happening in other jurisdictions, but we have not taken any decision on this,” he said. “I think it is still early days.”