Chile is considering the launch of a Central Bank Digital Currency (CBDC), with the central bank conducting a survey that revealed almost 90% of respondents were in favor of CBDC pilots. The Central Bank of Chile (BCCh) has announced it will begin Proof-of-Concept testing to gain experience with technologies related to digital currencies. Initial tests will be conducted internally, with external support sought when ready to roll out the digital peso. The bank appears to be moving in line with the majority of the world’s central banks, as many countries are either set to launch CBDCs or are actively researching digital fiat projects.
Alberto Naudon, an advisor to the central bank, believes that a Chilean CBDC may face more competition from stablecoins backed by large companies, rather than cryptocurrencies like Bitcoin. Naudon sees stablecoins as having the potential to achieve significant mass adoption due to their characteristics. In many countries in Latin America, USD-pegged coins are more widely used than Bitcoin, indicating potential for stablecoins as competitors to a digital peso. The BCCh is looking to gain the necessary experience and technology through the Proof-of-Concept testing before moving forward with real-world tests or potential rollout of the CBDC.
In 2022, the BCCh began and then abandoned a CBDC project, citing uncertainty about the benefits of a digital peso rollout. However, in 2024, the bank appears to have changed its stance after receiving positive feedback from the survey and seeing the global trend among central banks towards CBDCs. Central Bank of Chile President Rosanna Costa has reiterated the bank’s commitment to extending rate-cutting cycles, taking into account new global risks in their outlook. The bank’s intention to move forward with the CBDC project aligns with the approach of most major countries in the LATAM region and other nations worldwide that are exploring digital fiat currency initiatives.
The BCCh’s decision to conduct Proof-of-Concept testing for a digital peso indicates a commitment to gaining practical experience with CBDC technologies before moving forward with a potential rollout. By internally testing the digital currency first and seeking external support at a later stage, the bank is taking a cautious approach to ensure the success and viability of the CBDC. With a high level of public support for CBDC pilots, the BCCh aims to align with global trends in central bank policies towards digital currencies and ensure that Chile remains competitive in the evolving financial landscape.
As Chile progresses towards a potential CBDC launch, the central bank is likely to face competition primarily from stablecoins rather than cryptocurrencies like Bitcoin. The potential for stablecoins to achieve mass adoption, backed by large companies and characterized by stability, poses a challenge for a digital peso in the Latin American region. The BCCh’s move towards CBDC development reflects a shift in policy that acknowledges the changing dynamics of the global financial system. By embracing digital currency initiatives and aligning with international trends, Chile aims to position itself as a forward-thinking player in the evolving financial landscape. The BCCh’s decision to conduct internal testing before seeking external support demonstrates a strategic approach to ensure the success of a digital peso rollout and gain valuable insights into CBDC technologies.
