The Banco Central de Chile recently published its second report exploring the concept of a central bank digital currency (CBDC). It ultimately found there’s no need for one due to high levels of financial inclusion in the country (85-87%), but said it would prepare nonetheless.
The report was the second of its kind and included 450 responses and the findings of eight working groups.
Innovation, efficiency, and concerns about acceptance
Survey respondents cited financial innovation, alternatives to electronic payments, a desire to encourage competition, lowering costs associated with payments, and enhancing efficiency as benefits of a CBDC.
The roundtable consultations found greater efficiency in remittances, programmable payments and smart contracts, digital public money, and settling payments digitally as motivations.
However, consumer acceptance of a CBDC was seen as a major challenge. Chile has two credit or debit cards per capita, e-wallets are widely available, and around 95% of the adult population has a bank account with Banco Estado. The usual concerns about bank deposits leaving accounts and the potential economic impacts were also raised.
CBDCs march on
While Chile has opted not to go forward with a CBDC for now, many other countries have reached the opposite conclusion. China’s digital yuan is live, BRICS countries are considering blockchain-based stablecoin settlements, and countries from Israel to South Africa are designing and testing CBDCs. Russia and Iran are even developing a CBDC to settle payments since they are currently locked out of SWIFT.
Across the world, most studies and surveys find similar pros and cons to CBDCs. Efficiency, faster and cheaper payments, and programmable money are almost universally seen as positives, but concerns about reduced bank deposits and consumer uptake are almost always listed as drawbacks.
Among citizens, attitudes to CBDCs differ widely. In developing nations, they tend to be seen in a more positive light, while citizens in the United States, Canada, the United Kingdom, and elsewhere have concerns about privacy and government control.
Many of the concerns and downsides related to CBDCs can be mitigated by operating them on scalable public blockchains like BSV. Doing CBDCs this way would also eliminate many technical issues, such as cross-border settlement and efficient exchange. However, where CBDCs are being implemented, they are being done on private ledgers controlled by the central banks themselves.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
Watch: The state of play and what’s to come with CBDCs
