Bank of Mexico plans to launch digital currency by 2024

0


MEXICO CITY — The Bank of Mexico plans to bring its own digital currency into circulation by 2024 to use the latest payment technologies to drive financial inclusion in an economy that relies on cash for most transactions, according to the Mexican government.

The central bank considers it important “to use these new technologies and latest generation payment infrastructures as valuable options to advance financial inclusion in the country”, said the administration of President Andrés Manuel López Obrador in a tweet Wednesday night.

The Bank of Mexico said it is studying the development of a digital currency in phases. It will use the current electronic payment system as the basis of the platform to expand payment options “in a fast, secure and efficient manner,” the bank said in a recent report.

Central bank authorities have been in talks with financial institutions on the implementation and infrastructure needed to launch a digital currency that could be used for basic transactions, said a person familiar with the bank’s plans. from Mexico.

A large number of transactions are carried out in cash, especially given the large informal economy, which in 2020 accounted for around 22% of Mexico’s gross domestic product.

The Federal Reserve is trying to figure out how to keep liquidity relevant in a cashless world. It plans to digitize the U.S. dollar, give people cash they can access on their phones, and bypass electronic payments that can be slow and expensive for businesses. Illustration: Jacob Reynolds / WSJ

The central bank, known for its orthodox monetary policies, has warned of the risks of privately issued cryptocurrency assets such as bitcoin, given their volatility in value and limited acceptance. Officials, however, have been open to central bank digital currencies as a way to promote financial inclusion.

Central banks must act quickly to develop new forms of money and fully functioning digital currencies amid the growing use of crypto assets and the risks they carry, said Bank of Mexico Governor Alejandro Díaz de León at an International Monetary Fund event in July.

In June, Mexican billionaire Ricardo Salinas Pliego said he was working to make his Banco Azteca the first bank in Mexico to accept bitcoin.

The Bank of Mexico, the Mexican Ministry of Finance, and banking and securities regulators said in response that cryptocurrencies, including bitcoin and others, are not legal tender in Mexico and financial institutions are not. are not authorized to offer transactions with such assets.

“Although they can be exchanged, they do not serve the function of money, as their acceptance as a means of payment is limited and they do not constitute a good store or a benchmark of value,” they said.

Unlike bitcoin and others, central bank digital currencies are a virtual or electronic form of fiat money. The Bahamas launched the world’s first central bank digital currency, the Sand Dollar, in October 2020.

The Switzerland-based Bank for International Settlements, headed by former Bank of Mexico governor Agustín Carstens, said a 2021 survey found 86% of central banks were looking for potential for digital currencies from banks. plants, 60% were experimenting with related technologies. , and 14% were carrying out pilot projects.

The aim of the research is to determine whether these currencies protect public confidence in money, maintain price stability and ensure secure payment systems, the BIS said.

As central banks explore the potential of digital currencies, little El Salvador took the plunge this year by becoming the first country to adopt bitcoin as legal tender.

El Salvador became the first country in the world to adopt bitcoin as its national currency, allowing people to use a digital wallet to pay for everyday goods. This is what the risky experience of the impoverished nation looks like. Photo credit: Marvin Recinos / Agence France-Presse / Getty Images

Bitcoin, Dogecoin, Tether: the cryptocurrency markets

Write to Anthony Harrup at [email protected]

Copyright © 2021 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the print edition of December 31, 2021 under the title “Mexico wants digital currency to help foster financial inclusion.”


Share.

Comments are closed.