Unlocking the potential for innovation

The rise of coins Central bank-issued digital currency (CBDC) is becoming a global phenomenon. eleven central banks They have already launched their digital currencies, 20 of them are in the pilot phase and more than 100 countries[1] are research on the use of CBDC improve the stability, resilience and efficiency of financial systems.

CBDC is basically a currency virtual issued by the central bank. But unlike traditional paper currencies, such as the US dollar or the euro, CBDC exists only in digital form. Each central bank that is inCBDC research it has its reasons for doing so, which range from promoting financial inclusion and efficiency to maintaining independence in matters of monetary policy and promoting public access to central bank money.

There are two main types CBDC: retailers and wholesalers. CBDCs Retailers are designed for use by the general public and are intended to be the digital equivalent of cash. Wholesale CBDCs, on the other hand, are designed for use by financial institutions and are typically used for interbank settlements and other wholesale transactions.

In Latin America and the Caribbean (LAC) there is a huge opportunity to create value from what Can I offer CBDC. But the industry needs to address several challenges to drive early adoption, democratization and mass use of these digital currencies, especially when it comes to retail CBDCs and the public’s willingness to use these digital currencies.

That’s why Visa innovation centers conducted research in cooperation with leading technical experts for cryptocurrencies[2] with LAC consumers and merchants to understand the wants and sentiments around retail CBDCs to share relevant and unique data about current customer behavior and needs with our partners and policy makers. The results show two critical elements that can influence the widespread adoption of retail CBDC: building trust and expanding digitization.

Confidence

trust is essential when it comes to money, management and technology. Our research study found that there is a growing sense of lack of confidence in the technological capabilities of governments and Central banks to create resilient infrastructure for CBDCs, all of which was fueled by unstable political environments. There are also questions about the level of independence and privacy that CBDC can offerthe fear of increased government control of assets through programmability and the fear that CBDC could become mandatory rather than optional.

A research study reveals that, adopt a retail CBDC, most users require a hybrid model where governments work with the private sector to provide secure innovation and credibility to new digital money experiences. The study also highlights that CBDC it should be presented as a suitable alternative to cash, not as a mandatory currency. Likewise, it is essential to create protocols that always offer consumers and businesses transparency and full control over their money, assets and information.

Digitization encourages widespread use

Mass adoption of CBDC marketers would require overcoming the low rate of financial inclusion and digitization that is still present in a significant segment of the population. Those who participated in the research believe that it is almost impossible to imagine a cashless ecosystem, but they believe that digital is the future. Businesses and consumers are very interested in CBDC’s potential social benefits and economic digitization for underserved and underbanked populations, but are also uncertain about CBDC’s added value beyond digital money.

Therefore, it will be important not only to ensure the use of iluntil CBDC is accepted everywhere, but also to provide an incentive for it. CBDC ecosystems must respond to the needs of these populations and enable better access to funds and greater digital and financial literacy.

Implementing digitization in phases, with practical, functional and affordable solutions and faster and more efficient government payments, will also demonstrate efficiency, reduce reliance on cash and facilitate a smoother user transition to retail CBDC.

Despite these obstacles, we believe that opportunities are greater for creating a payment ecosystem with CBDC mmore efficient, safer and frictionless. Our CBDC experts are actively working with central banks, financial institutions and fintech companies to create trust-based ecosystems and user-centric use cases to foster early adoption and democratize CBDC throughout the LAC region, for everyone and everywhere.