CBDCs are a digital form of money denominated in the national unit of account, representing a liability for the issuing Central Bank. This distinguishes them from private digital money, such as the balance in a bank checking account. CBDCs can be designed for exclusive use among financial institutions (wholesale CBDCs) or for broad use across the economy (retail CBDCs).

When we deposit money into a checking account, a prepaid card, or receive a loan credited to one of these accounts, financial institutions issue money in electronic format, which is a liability of those institutions. This is merely a digital representation of those funds, which can be used via electronic fund transfers, payment cards, or converted to cash through ATMs.

Various public policy instruments support trust in electronic money, including a proper regulatory and prudential oversight framework, as well as state-backed guarantees or insurance for demand obligations. This ensures that money issued by private entities is convertible at par with cash issued by the Central Bank, making users perceive little difference between them and physical cash.

CBDCs, on the other hand, are issued by central banks and therefore represent a liability of the issuing institution. This would allow individuals and businesses to make digital transactions directly using a Central Bank liability. Moreover, CBDCs have characteristics that make them more similar to cash for users. For example, they could be easier to use as they might not require a bank account, would be low-cost, protect user privacy, and be resilient to natural disasters, as they could be used without internet access in emergencies.

The interest in evaluating the issuance of a CBDC arises in the context of significant progress in the digitalization of transactions, a phenomenon supported by the adoption of new technologies and the emergence of new actors, which has transformed how people make payments.

Additionally, this interest is set against a backdrop where more countries are exploring the issuance of digital currencies. Although the interest in CBDCs among central banks is notable, few jurisdictions have decided to issue one. This may be due to the motivations or existence of relevant use cases, as well as the magnitude of associated challenges, which go beyond technological or operational dimensions.

Continuing to analyze and study CBDCs presents an opportunity for the Central Bank of Chile to explore and deeply understand the complexities and challenges that could arise from the potential design and implementation of this new form of Central Bank money.

The Central Bank of Chile has decided to continue the process of analyzing and studying CBDCs, complementing conceptual efforts and monitoring international experiences with an hands-on phase, in line with the evolution seen in other economies.

However, it is important to note that the Central Bank still considers that there is insufficient information to make a definitive decision regarding the issuance of a CBDC. Therefore, the decision to continue exploring should not be interpreted as a decision to issue a CBDC, nor as a change in the Bank’s commitment to provide cash to those who require it—a mandate that remains in force and is implemented through the Bank’s daily work in currency provision and management.