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Central bank digital currencies (CBDCs) in Latin America and the Caribbean

Author

Listed:
  • C, Viviana Alfonso
  • Kamin, Steven
  • Zampolli, Fabrizio

Abstract

The pros and cons of CBDCs have been examined in numerous writings but much less research has focused on specific economies or regions. This paper attempts to fill that gap for the Latin American and Caribbean (LAC) economies. It first examines the views of central banks in the region toward CBDCs, drawing on a BIS survey conducted in late 2020 and early 2021. It finds that a large share of LAC central banks are engaged in CBDC research, as in other regions, and that their interest is primarily centred around financial inclusion, efficiency, and safety of the domestic payments system. Second, the paper examines whether the engagement of LAC central banks with CBDCs can be explained by the structural characteristics of their economies. It finds higher engagement in countries with strong innovation, fast payment systems, high government effectiveness, high financial development, and strong interest in CBDCs by the public. LAC jurisdictions are generally weaker in these areas than in advanced economies but are broadly comparable to other EMDEs. Third, the paper identifies potential benefits of CBDCs that are particularly relevant for LAC economies: promotion of financial inclusion; reduction of informality; increasing the resilience of the payment system in the face of natural disasters; increasing competition in the payments system; and reducing the cost of cross-border payments. The paper also discusses the costs and risks of CBDCs but argues that these can be addressed through proper design and implementation. Finally, the paper reviews the design choices made by a number of central banks in the region and the associated implementation issues. Common features of CBDCs in use include a two-tier architecture, offline capabilities, restriction to be used only by residents, and safeguards for privacy, but they differ in their approach to ledger management.

Suggested Citation

  • C, Viviana Alfonso & Kamin, Steven & Zampolli, Fabrizio, 2025. "Central bank digital currencies (CBDCs) in Latin America and the Caribbean," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 6(1).
  • Handle: RePEc:eee:lajcba:v:6:y:2025:i:1:s266614382400022x
    DOI: 10.1016/j.latcb.2024.100140
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    References listed on IDEAS

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    More about this item

    Keywords

    Central bank digital currency; CBDC; Payment systems; Central banking; Digital currency;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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