The Chilean Central Bank's (CBDC) digital currency would have to accept offline payments, the central bank's governor said at an event on Tuesday. Governor Rosanna Costa promised to present a policy paper on the issue later this week, but added that no final decision has been made on whether to issue a digital form of the Chilean peso.
According to a recent BIS survey, nine out of 10 central banks are considering issuing their own virtual assets, in part due to competition from Bitcoin, though they are grappling with issues of access design and data protection.
The CBDC should "work both online and offline," Costa said at a Swiss National Bank event, adding that the technology to do so "is not necessarily efficient today."
The system should allow authorities to "trace the transaction after the fact" while protecting personal data, Costa said.
The CBDC must coexist with cash and commercial banks and be convertible and secure, she added, saying pilot projects could be implemented this year after further discussions with the public and private sectors.
In countries such as the European Union (EU), officials are considering how to balance the ability to make discrete cash-like transactions with the need to track illicit financial flows - and are considering offering more private means of payment for smaller purchases. Ghana has also considered making its CBDC available offline.
Others think the issue is a waste of time and that central banks should focus on areas where payments are currently difficult.
"We are barking up the wrong tree with retail CBDCs," Ravi Menon of the Monetary Authority of Singapore said at the event, arguing that existing payment networks are sufficient to meet the needs of citizens.
"The tree we should be targeting is CBDCs for cross-border payments," Menon added, referring to banks being able to conduct large international transactions without the traditional tools such as correspondent banking systems and SWIFT messaging services, which he described as "cumbersome" and "archaic."
International standard-setters have broadly supported the issuance of CBDCs, but fear it could cause central banks to lose their authority to tell citizens what to do with their money.
"In many countries with weak institutions, citizens may have incentives to create money out of the country," said Tobias Adrian, director of the IMF's Monetary and Capital Markets Department. "The vast majority of countries have some form of capital controls, and there is both direct and anecdotal evidence that crypto assets 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 crypto-assets.