Bank of Mexico Plans to Launch Digital Currency by 2024

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Central bank schemes aimed at promoting financial inclusion in cash-based economy, says government

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

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A person familiar with the Bank of Mexico’s plans said central bank officials are in talks with financial institutions about the infrastructure needed to launch a digital currency that can be used for basic transactions.

A large number of transactions are done with cash, especially given the large informal economy, which accounted for about 22% of Mexico’s GDP in 2020.

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The central bank, known for its conservative monetary policies, has warned against the risks of privately issued cryptocurrency assets such as bitcoin, given their volatility in value and their limited acceptance. However, officials are open to central bank digital currencies as a way to promote financial inclusion.

Central banks need to move quickly to develop new forms of currency and fully powered digital currencies, amid the increased use of crypto assets and their exposure, Bank of Mexico Governor Alejandro Díaz de León said in July. Said at the International Monetary Fund program.

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

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

“While they can be exchanged, they do not fulfill the function of money, as their acceptance as payment is limited and they are not a good reserve or reference of value,” he said.

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

The Switzerland-based Bank for International Settlements, chaired by former Bank of Mexico Governor Augustin Carstens, said a 2021 survey found 86% of central banks are researching potential for central-bank digital currencies, 60% Were experimenting with related technology. , and 14% were running pilot projects.

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

While central banks are exploring the potential of digital currencies, this year smaller El Salvador made the move to become the first country to adopt bitcoin as legal tender.

Write Anthony Harrup [email protected] Feather

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