Bank of Mexico Plans to Launch Digital Currency by 2024
Central bank’s plans aim to foster financial inclusion in a cash-based economy, government says
The Bank of Mexico plans to put its own digital currency in circulation by 2024 to use the latest payments technology to foment financial inclusion in an economy that relies on cash for most transactions, according to the Mexican government.
The central bank considers it important “to use these new technologies and latest-generation payments infrastructure as valuable options to advance financial inclusion in the country,” the administration of President Andrés Manuel López Obrador said in a tweet last week.
The Bank of Mexico has said it is studying the development of a digital currency in several phases. It will use as a basis for the platform the current electronic payments system to expand payment options “under a rapid, safe and efficient” framework.
Central bank authorities have been in talks with financial institutions about the implementation and the infrastructure needed to launch a digital currency that could be used for basic transactions, a person familiar with the Bank of Mexico’s plans said.
A large number of transactions are done with cash, particularly given the large informal economy, which in 2020 accounted for around 22% of Mexico’s gross domestic product.
The central bank, known for orthodox monetary policies, has warned against the risks of privately issued cryptocurrency assets such as bitcoin, given the volatility in their value and their limited acceptance. Officials, however, have been open to centralbank digital currencies as a way to promote financial inclusion.
Central banks need to move quickly to develop new forms of money and fully operable digital currencies amid growing use of crypto assets and the risks they entail, Bank of Mexico governor Alejandro Díaz de León said at an International Monetary Fund event in July.
In June, Mexican billionaire Ricardo Salinas Pliego said he was working on having his Banco Azteca become the first bank in Mexico to accept bitcoin.
The Bank of Mexico, the Mexican finance ministry and banking and securities regulators said in response that cryptocurrencies, including bitcoin and others, aren’t legal tender in Mexico and that financial institutions aren’t allowed to offer operations with such assets.
“Although they can be exchanged, they do not fulfill the function of money, as their acceptance as a form of payment is limited and they aren’t a good reserve or value reference,” they said.
Unlike bitcoin and others, centralbank digital currencies are a virtual, or electronic form of fiat currency.
The Bahamas launched the world’s first central-bank digital currency, the sand dollar, in October 2020.
The Switzerland-based Bank for International Settlements, which is headed by former Bank of Mexico governor Agustín Carstens, said a 2021 survey found that 86% of central banks are researching potential for centralbank digital currencies, 60% were experimenting with related technology, and 14% were running pilot projects.
The aim of the research is to determine whether such currencies safeguard public trust in money, maintain price stability and ensure safe payment systems, the BIS said.
While central banks are exploring the potential for digital currencies, tiny El Salvador this year took the step of becoming the first country to adopt bitcoin as legal tender.