Peru is looking into CBDC to strengthen its payment system:Ex-IMF advisor
April 6, 2023 5:05 AM
The Peruvian Central Reserve Bank has published a paper detailing its efforts to create a central bank digital currency, and it plans to publish additional studies as its investigation continues.
According to John Kiff, director of research at the Sovereign Official Digital Association, the Central Reserve Bank of Peru (CRBP) has released a document that it claims→ is the first in a series examining the necessity, design, and timing of a digital currency issued by the Peruvian central bank (SODA). The focus of his report is on questions that pertain to a commercial CBDC.
According to the CBRP, Peru's current system of competing payment systems is unsustainable, but the introduction of a CBDC, along with new policies to improve the accessibility and interoperability of existing systems, would allow the central bank to remove obstacles to financial inclusion and reduce transaction costs. The report→ concludes:
"The goal of a CBDC inside the payment system framework in Peru is to allow the unbanked people access to digital payments, therefore understanding their characteristics is crucial before developing a rollout plan."
The challenges Peru faces are formidable. Almost half of all citizens do not have bank accounts. Almost 80% of the unbanked do not have any savings, but the vast majority (75%) do not come from "poor" homes. They tend to congregate in cities, where the majority of them find informal employment. The vast majority of the unbanked population has access to a cell phone.
Despite this, the survey found that the number of digital payments made in Peru had surged by a factor of five since 2015.
According to the study, the first of five stages in the possible creation of a CBDC was completed with the completion of this report. There was no mention of a CBDC development schedule. The CBRP has also distributed a survey→ with 25 questions for prospective users, with an April 30 deadline.
Under the terms of an agreement reached in May of 2021, the International Monetary Fund provided technical assistance to Peru in the development of the report. CBRP President Julio Velarde declared in November 2021 that the government would collaborate with India, Singapore, and Hong Kong to create a CBDC.
SODA is a technology-agnostic consultancy that offers counsel on issues related to government finance, digital currency, and the Web3 sector. Kiff used to work as an expert for the IMF.