The digital currency issued by Chile's central bank (CBDC) must accept offline payments, the head of Chile's monetary authority, Rosanna Costa, said at an event on Tuesday. Costa promised to present a policy paper on the issue later this week, but added that no final decision has been made on issuing a digital version of the Chilean peso.
Read this article in Spanish.
A recent survey by the Bank for International Settlements (BIS), a central bank-owned organization, shows that nine out of 10 central banks are considering issuing their own virtual assets, in part because of competition from Bitcoin, but that they are grappling with design issues to ensure access and privacy.
The CBDC should "work both online and offline," Costa said at an event hosted by the BIS, adding that the technology to do so "is not necessarily efficient at the moment."
The system should allow authorities to "track the transaction after the fact" while protecting personal data, Costa said.
CBDCs would have to coexist with cash and commercial banks, be convertible and secure, Costa said, adding that pilot projects could be implemented this year after further discussions with the public and private sectors.
In countries such as the European Union, authorities are considering how to balance the ability to conduct discreet cash-like transactions with the need to track illicit finances and are considering offering private payment methods for small purchases. Ghana has also considered making its CBDC available offline.
Others believe the problem is a waste of time and that central banks should focus on areas where payments are currently difficult.
"Ravi Menon of the Monetary Authority of Singapore said at the event that existing payment networks are sufficient to meet the needs of citizens and that we are going down the wrong path with CBDCs," he said.
"The way we should go is wholesale CBDCs for cross-border payments," Menon added, referring to banks being able to conduct large international transactions without traditional tools such as the SWIFT messaging service, which he called "cumbersome" and "archaic."
Issuers of international standards have been largely supportive of issuing CBDCs, but fear that doing so could cause central banks to lose their authority to tell citizens what to do with their money.
"In many countries with weak institutions, citizens have incentives to move money out of the country," said Tobias Adrian, director of the International Monetary Fund's (IMF) Money and Capital Markets Department. "The vast majority of countries have some form of capital controls, and there is both direct and indirect evidence that cryptoassets are being used to do that."
The IMF recently said countries should expand their laws to ensure that measures such as restrictions on foreign payments include cryptoassets.
This article was translated by Marina Lammertyn.