The International Monetary Fund (IMF) states that Latin American and Caribbean countries have made great strides in regulating digital assets and CBDC development, though there are some challenges in this area.
The IMF analysts published a report on the situation of digital asset adoption in Latin America and the Caribbean. The document’s authors state a high level of acceptance of cryptocurrencies in the region and the active development of central bank digital currency (CBDC) projects.
Specifically, the document highlights the following:
- El Salvador adopted Bitcoin as legal tender at the legislative level.
- Brazil, Argentina, Colombia, and Ecuador are among the top 20 most successful countries in 2022 in terms of global adoption of crypto-assets.
- CBDCs are already in use in the Bahamas, the Eastern Caribbean Currency Union (ECCU), and Jamaica, and the Brazilian digital real is at the Proof-of-Concept stage.
- Twelve of the nineteen jurisdictions in the region have either implemented a regulatory framework for digital assets or are in the process of doing so.
Meanwhile, the IMF analysts outline the challenges faced by Latin America and the Caribbean with regard to the development of the digital asset market:
- Increasing levels of corruption and the volume of shadow economy sectors, resulting in risks of macroeconomic instability and low institutional trust.
- The low level of development of digital infrastructure.
- Competition with the less efficient banking sector.
The authors cite as examples the situation in Guatemala, where a pilot project of the cryptocurrency wallet Novi by Meta was launched. The technology, which allows users to make domestic and international payments without commissions, became so popular that it posed a direct threat to the country’s national currency. The project was shut down.
Another example is the disruption of CBDC projects in the Caribbean, which is the consequence of infrastructure problems in the region. In this case, the IMF analysts note that most central banks in the region are actively studying the CBDC and developing their own projects. The document’s authors point out that the central bank digital currency may be considered the most promising form of digital assets. CBDCs can meet the need of local residents for fast and cheap digital payments and eliminate the cause of the demand for cryptocurrencies, as well as the risks associated with them, while the prohibition of cryptocurrencies is an ineffective measure.
The day before, the IMF presented an innovative concept of a global payment system, largely based on developments related to the CBDC and containing only one mention of blockchain. Immediately after that, the Bank for International Settlements (BIS) proposed a similar payment system concept, also based on the CBDC, but without a single mention of blockchain.
