Latin American and Caribbean countries have varied takes on “digital money”, whether it’s the central bank digital currency (CBDC) or cryptocurrencies. The International Monetary Fund’s (IMF) recent report highlighted the situations in the LAC region with CBDCs and crypto assets like Bitcoin (BTC). Countries falling in the region often struggle to keep up the pace in economic activities due to multiple challenges, and hence, an economic disruption always remains the need of the hour.
LAC Countries Towards “Digital Money”
In the report, the IMF noted countries in the Latin American and Caribbean region are ahead of other countries in terms of adoption of crypto or CBDC, or both. Those who are yet to adopt, are in the process and are making continued efforts.
El Salvador, the first country in the world to make Bitcoin (BTC) legal tender, is part of the LAC region. While other countries who are not taking the similar road, are seeking the possibilities of CBDC development.
According to the IMF, The Bahamas launched a native CBDC dubbed Sand Dollar in 2020. The Eastern Caribbean Currency Union (ECCU), a group of eight different regions, and Jamaica are the countries with their own digital currencies.
Central bank digital currency (CBDC) brings multiple advantages over the traditional fiat currency. The digital currency facilitates resilience in the payment systems, helps in boosting the financial inclusion of unbanked, and low cost cross-border remittances, etc. No wonder LAC countries are considering these benefits and seek the way to CBDCs.
The IMF found in a survey of government officials in the region that about 50% of the respondents were seeking retail and wholesale CBDC options. Central banks in the region have either developed their own CBDCs, or are in the process to develop one.
CBDCs become an option for countries to keep up with the innovation, while avoiding the risks like volatility and illicit usage for corruption and money-laundering. With proper design and infrastructure development, the central bank running digital currencies can provide required strength to the financial systems of countries. Its utilities, resilience and efficiency can reflect on countries’ payment systems and boost regional financial inclusion.
The IMF cited a Chainalysis report which showed the countries in the Latin American region are ahead in crypto adoption. As per the report, out of 20 countries leading in the global crypto adoption, four countries—Brazil, Argentina, Columbia and Ecuador—are from LATAM.
IMF’s survey from 2022 found at least 12 countries, out of 19 countries participants, confirmed to have a regulatory framework for cryptocurrencies, or were in the process.
Countries in the region have starkly different takes on cryptocurrencies. The report cited examples of El Salvador bullish on Bitcoin adoption, while Argentina and Dominican Republic like countries have put a ban on cryptocurrency usage, citing the risks involved.
Source: https://www.thecoinrepublic.com/2023/06/24/latam-and-caribbean-countries-interested-in-cbdcs-imf-report/