Last week, the central bank of Colombia released a report suggesting that limiting CBDC with a high degree of probability may be the right strategy for a financial institution.
The lender has not yet definitively confirmed its intention to issue a digital currency. The financial institution is actively exploring the relevant possibility and does not reject it at the level of an idea, but still has not yet come to a conclusion about how it should act in this matter.
The report of the central bank of Colombia indicates that restrictions on user assets and/or CBDC expenses may be a constructive step. According to experts in the financial institution, such a solution could provide a high level of protection against encroachments by cybercriminals, whose main interest is directed at the balance sheets of the lender’s clients and transactions. The bank’s analysts also believe that the likely decision to limit CBDC will contribute to a decrease in demand for retail digital currency as a means of saving assets.
The report suggests that a financial institution could launch virtual wallets with small storage limits and a high level of confidentiality for those customers who perceive the issue of the safety of their transactional data as critically important.
The bank’s experts also say that the massive spread of stablecoins as a payment instrument can cause the emergence of a whole set of risk factors, which are associated, among other things, with the difficulties of preventing financial activity that goes beyond the scope of legislative regulation and the loss of monetary sovereignty, which entails a decrease in the level of effectiveness of the country’s monetary policy.
In this case, the rejection of CBDC is not implied. The bank’s experts propose to establish a kind of regime for the limited distribution of a new generation of currency. It is still unknown what decision the financial regulator will make in the end.
The proposals of Colombian experts are not an innovative concept concerning the CBDC. In the UK, the Bank of England and other interested parties took part in the discussion, during which it was said that the digital assets of users of a new generation of currency should be limited to an amount in the range of 10,000 to 20,000 pounds.
The Bank of International Settlements reported that the benefits of a widely available CBDC may be limited if instant and efficient solutions for private retail payments are already available or are in development.
As we have reported earlier, Brazilian fintech grows reach in Colombia through new partnerships.