The Central Reserve Bank of Peru has released a report discussing the development of a central bank digital currency CBDC, with further reports promised as research continues.
The report focuses on issues related to a retail CBDC, examining the need, design, and timing of a Peruvian CBDC.
According to the report, the introduction of a CBDC, combined with new policies to improve the access and interoperability of existing systems, would help the bank overcome barriers to financial inclusion and lower costs for transactions.
The CBRP noted that the status quo of competing payments systems in Peru is untenable, and the objective of a CBDC is to give the unbanked population access to digital payments.
Peru faces significant obstacles, as about half of the country’s population is unbanked. Three-quarters of the unbanked live in “non-poor” households, but almost 79% of them have no savings.
The unbanked live mainly in urban areas and almost all of them work informally. Nonetheless, the use of digital payments in Peru has increased fivefold since 2015.
The report states that the first of five steps towards potentially producing a CBDC has been completed, but no timeline for CBDC development was provided. The CBRP has also issued a survey with 25 questions for potential users, which is due by April 30.
The International Monetary Fund (IMF) provided technical assistance to Peru in creating the report, following an agreement reached in May 2021.
In November 2021, CBRP President Julio Velarde announced that Peru would collaborate with India, Singapore, and Hong Kong to develop a CBDC.
SODA, a technology-agnostic firm that offers advisory services related to central banking, digital finance, and the Web3 industry, reports that the release of the report is the first in a series to examine the need, design, and timing of a Peruvian CBDC. John Kiff, research director at SODA and a former IMF section expert, is part of the SODA team.
CBDCs have become a hot topic in the finance world, with many central banks exploring the possibility of creating their own digital currencies.
The Bank for International Settlements has reported that 86% of central banks worldwide are currently researching CBDCs, with 60% of central banks experimenting with the technology.
The benefits of CBDCs include increased financial inclusion, lower costs for transactions, and the ability to provide a more secure and efficient alternative to traditional payment systems.
However, there are also concerns, such as the potential impact on the banking industry, privacy and security concerns, and the possibility of financial instability.
As more central banks explore the possibility of creating CBDCs, it will be interesting to see how the technology develops and what impact it will have on the global financial system.
Peru is just one of many countries examining the possibility of CBDCs, and it will be fascinating to see how the CBRP progresses in its research and development of a Peruvian CBDC.
Peru CBDC
In summary, the Central Reserve Bank of Peru’s report on the development of a central bank digital currency (CBDC) is the first in a series to examine the need, design, and timing of a Peruvian CBDC.
The introduction of a CBDC, combined with new policies to improve the access and interoperability of existing systems, could help the bank overcome barriers to financial inclusion and lower costs for transactions.