Julio Velarde, president of the Central Reserve Bank of Peru (BCRP), revealed that the central bank is working to create a CBDC in partnership with other central banks around the world. As the country grapples with insecurity and inflation in goods and services, the central bank is debating financial models to tackle the impending disaster.
At the CADE 2021 business conference, Velarde revealed that the BCRP had “been working on a digital coin” and other projects with the cooperation of central banks in India, Singapore and other countries.
According to the president of the BCRP, “the payment system that we will have in the world in eight to ten years will be radically different from the current one,” and Peru’s digital coin will pave the way for the country’s future.
He declined to talk further about other projects the central bank is working on due to the uncertainties surrounding the issues at the moment.
In Peru, the landscape surrounding cryptocurrency is blurry. The government has issued warnings and several authorities have indicated that cryptocurrencies are “at risk” and that strict laws are pending, but no official decision has been made.
Velarde said that due to so many advances in cryptocurrencies, the goal of Peru’s central bank is to “give them kind of a sandbox and let them move forward.” A more concrete regulation will be published later.
The Bank for International Settlements (BIS), a financial institution whose mission is to coordinate central banks around the world in the âpursuit of monetary and financial stabilityâ, naturally got involved in the development of CBDCs. They have “six proofs of concept and prototypes related to the CBDC” and are working on others, according to reports.
During a speech, BenoÃ®t CurÃ©, head of the BRI Innovation Hub, affirmed that central bank money offers major advantages such as “security, purpose, liquidity and integrity” and underlined the importance of ” adapt and organize digital economies to avoid losing these âadvantagesâ. . âMoney,â he added, âmust continue to be issued and regulated by reliable and accountable organizationsâ.
According to CurÃ©, the technological future of the bank that we are addressing raises many challenges that global companies must respond to. Blockchain, stablecoins, DeFi, and the digital economy in general have led to rapid growth in financial concepts and new opportunities.
This shook many foundations, especially those of private banks. CBDCs, according to BenoÃ®t CurÃ©, are âpart of the solutionâ, but âglobal stablecoins, DeFi platforms and huge IT companies will disrupt bank models anywayâ.
Cryptocurrencies are defined by the Central Bank of Peru (BCRP) as âunregulated financial assets that do not have legal treasury status and are not backed by central banksâ. The website describes a reduction in the price of Bitcoin in 2018, but has not updated the chart to reflect its growth in subsequent years.
However, as Peruvians expect their national currency to depreciate in the near future, cryptocurrencies offer an alternative and have become increasingly popular.
From June to July 2020, Peru saw an 18.3% increase in Blockchain crypto wallet transactions. Trade volume then increased by around 24.36% in May 2021 due to uncertainties surrounding the presidential elections.
The decentralized nature of cryptocurrencies has provided a safe haven landscape and a shift in economic struggle alongside the possibility of a massive downturn in the Peruvian economy, as many of the policies proposed by current President Pedro Castillo , are similar to those implemented by Argentina. and Venezuelan governments, where they have been shown to have a significant impact on the economy and the national currency.