Peruvian authorities have released a report on the potential development of a central bank digital currency (CBDC), stating that the introduction of such a currency could help to lower costs and increase financial inclusion. The Central Reserve Bank of Peru (CRBP) has published the first in a series of reports examining the need, design, and timing of a Peruvian CBDC.
According to the report, around half of Peru’s population remains unbanked, with almost 79% of unbanked people having no savings. The report states that the objective of a CBDC is to give the unbanked population access to digital payments and improve financial inclusion. The use of digital payments in Peru has increased fivefold since 2015, showing a growing trend towards digital finance in the country.
The CBRP acknowledges that there are obstacles to overcome, but with the help of a CBDC, along with new policies to improve access and interoperability of existing systems, financial inclusion and lower transaction costs could be achieved. The CBRP also released a 25-question survey of potential users, due April 30th.
The report marks the first step in a potential five-step process for the production of a CBDC in Peru, and no timeline has been mentioned for its development. However, Peru has received technical assistance in the creation of the report from the International Monetary Fund under an agreement reached in May 2021. Additionally, the CBRP announced in November 2021 that it would cooperate with India, Singapore, and Hong Kong to develop a CBDC.
The potential benefits of CBDCs in retail trade and e-commerce make them a compelling option for central banks around the world, as demonstrated by countries such as Russia, Japan, Thailand, Australia, South Korea, Sweden, and India, all of whom have shown interest in developing a CBDC. In a July 2022 interview, Alejandro Zelaya, finance minister of El Salvador, asserted that the adoption of Bitcoin had benefited the nation’s unbanked residents as well as attracted tourists and investments. CBDCs offer a way to bridge the gap between traditional finance and decentralized finance.
According to John Kiff, research director at the Sovereign Official Digital Association (SODA), “CBDCs are an exciting development in the world of finance.” SODA provides advisory services on central banking, digital finance, and the Web3 industry. Kiff added, “While there are challenges that need to be addressed, the potential benefits of CBDCs in retail trade and e-commerce make them a compelling option for central banks around the world.”
The potential development of a CBDC in Peru could have a significant impact on the country’s economy. If successful, it could help to reduce the number of unbanked people, increase access to digital payments, and lower transaction costs. With the use of digital payments increasing fivefold since 2015, there is a clear demand for digital finance in the country.