Julio Velarde, President of the Central Reserve Bank of Peru (BCRP), revealed that the central bank is working on building a CBDC in partnership with other central banks across the world. As the country faces insecurity and inflation in goods and services, the central bank is debating financial models to combat the impending catastrophe.
During the CADE 2021 business conference, Velarde revealed that the BCRP has been “working on a digital coin” and other projects with the cooperation of the central banks of India, Singapore, and other countries.
According to the BCRP President, “the payment system we will have in the world eight to ten years from now 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 speak further on the other projects the central bank has been working on due to the uncertainties surrounding the issues at the present.
In Peru, the landscape surrounding cryptocurrency is hazy. The government has issued warnings, and several authorities have indicated that cryptocurrencies are “risky” and that strict laws are on the way, but no official decisions have been made.
Velarde stated that because numerous cryptocurrencies advancements are taking place, Peru’s central bank’s objective is to “give them a sort of sandbox and let them progress.” A more concrete regulation will be issued later.”
The Bank for International Settlements (BIS), a financial institution whose mission is to coordinate central banks throughout the world in the “pursuit of monetary and financial stability,” has naturally become involved in CBDC development. They have “six CBDC-related proofs of concept and prototypes” and are working on more, according to reports.
During a speech, Benoît Curé, Head of the BIS Innovation Hub, claimed that central bank money offers major advantages such as “safety, finality, liquidity, and integrity” and underlined the importance of adapting and fitting digital economies to avoid losing these “advantages.” Money, he added, “must continue to be issued and regulated by trusted and accountable organizations.”
According to Curé, the technological future of banking that we are approaching raises many challenging challenges for global corporations to answer. The blockchain, stablecoins, DeFi, and the digital economy, in general, have resulted in the rapid growth of financial concepts and new opportunities.
This has shaken many foundations, particularly those of private banks. CBDCs, according to Benoît Curé, are “part of the solution,” but “global stablecoins, DeFi platforms, and huge IT corporations will disrupt banks’ models anyway.”
Cryptocurrencies are defined by the Central Bank of Peru (BCRP) as “unregulated financial assets that do not have the status of legal cash and are not backed by central banks.” The website depicts a reduction in Bitcoin’s price in 2018 but has not updated the graphic to reflect its growth in subsequent years.
However, because Peruvians expect their national currency to depreciate in the near future, cryptocurrencies provide an alternative and have grown in popularity.
From June to July 2020, Peru experienced an 18.3 percent increase in Blockchain crypto wallet transactions. The trading volume then increased by roughly 24.36 percent in May 2021 due to the uncertainties surrounding the presidential elections.
The decentralized nature of cryptocurrencies provided a refuge landscape of freedom and an economic fighting change alongside the possibility of a massive drop in the Peruvian economy, as many of the policies proposed by the current president, Pedro Castillo, are similar to those implemented by the Argentinan and Venezuelan governments, where they have been shown to have a significant impact on the economy and national currency.