Mexico has been exploring the possibilities of launching a central bank digital currency (CBDC) over the last 12 months, but the country has hit a wall in its development.
Banxico, Mexico’s central bank, has been stuck at the initial stage of its CBDC development and the path to a full-scale launch remains unclear for enthusiasts. However, the General Directorate of Payment Systems and Market Infrastructures of Banxico disclosed in a transparency request that it had adopted a measured approach to the CBDC development.
“The result of this initial phase entails the preparation of a budget that is currently being determined, and will in turn allow establishing a probable date on which said MDBC will be available,” Banxico said.
The measured approach has drawn criticism, especially with comparisons to the hastened approach of other central banks. Banxico’s initial phase included the consultation of the legal, administrative, and technological requirements of the digital currency.
In its defense, the central bank argues that despite its tentative approach, it has already earmarked 10.22 million pesos ($534,684) for the CBDC development. Banxico’s Deputy Governor Jonathan Heath confirmed that the CBDC will be operational in early 2024, giving the central bank around 12 months to work with.
The bank has stated the creation of the CBDC will be carried out in three phases, with the first being the launch of a PagoCel platform for identifying users. In the second stage, financial institutions in the country will collaborate to allow the CBDC to be transferrable through the Interbank Electronic Payment System (SPEI).
The third phase of the project will focus on retail, allowing individuals to participate in promoting financial inclusion.
Legal tender but won’t operate like virtual currencies
Banxico has confirmed its CBDC will not operate in the same way as digital assets like BTC or Ethereum, hinting that distributed ledger technology (DLT) will not be used in their development.
In a Payment Strategy document, the central bank said the purpose of the CBDC is to “expand the possibilities of payment in the economy under the premises of speed, security, efficiency and interoperability.”
Over 91 countries are engaged in CBDC development, with some focusing on wholesale versions while others explore the benefits of a retail offering. The central banks are motivated by the need to stifle the adoption rates of virtual currencies and to study CBDC usage in cross-border payments but privacy issues.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
Watch: CBDCs and BSV
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