- The announcement was made by a senior official of the Bank of Mexico, who stated that the digital currency will not displace banknotes and coins.
- Mexico passed a law in 2018 to regulate cryptocurrency trading, prompting the central bank to issue an additional regulatory framework.
- Although the Mexican government does not consider innovation in the financial system important, the CBDC project continues.
It is very likely that the Bank of Mexico (Banxico) will issue its own central bank currency or CBDC, according to the reports circulating. The bank’s deputy governor, Jonathan Heath, stated that the issuing body is working on this project and it will be ready by the end of 2024.
“We are working on a project, we even have a schedule where we think that maybe by the end of 2024 at the latest, we should be operating perfectly well,” Heath said during a video conference organized by S&P Dow Jones Indices, according to a Mexican media.
The official’s statements are aligned with the announcements made by the governor of Banxico, Victoria Rodríguez Ceja, in early December. During an appearance before the Senate Finance and Public Credit Commission, the official announced that the bank was analyzing the implementation of a CBDC.
“Authorities at the international level, given the interest that these virtual assets and their evolutions have aroused, have recognized the need and the potential to extend the functionalities of legal tender and the potential implementation of digital currencies issued by the Central Bank,” she said.
On the Flipside
- Since 2018, Mexico has had the Fintech Law, a framework that regulates the storage and sale of cryptocurrencies, as well as the management of other electronic assets.
- The Central Bank of Mexico was obliged to also issue a statement regulating the trading of crypto assets in which it warns financial companies that they cannot transfer the associated risks to the end-user.
Against financial innovation
According to Heath’s statement, central bank electronic money will not replace cash but will complement it as other nations have already launched their CBDC or are in the process of doing so are planning.
The official argued that a large part of the Mexican economy is informal with high exclusion from the financial system. The low bankarization does not allow banknotes and coins to be replaced in the medium term.
“We are going to have the use of paper money as the predominant payment at the national level for a long time, so we do not want to be absent from these technological advances; we are there, we are going to do it and we are going to be working”, indicated Heath.
While he has not intervened to prevent cryptocurrency trading, Mexican President Luis Manuel López Obrador has preferred to stay out of these matters. Lopez Obrador, an old leftist politician, believes that financial innovation is not necessary.
From their perspective, the government should focus only on ensuring that the country’s income is maintained, through proper tax collection without evasion. The Mexican president has said that he will not follow in the footsteps of other countries in the region such as El Salvador.
Why You Should Care
- 14 countries, including China and South Korea, are already well advanced in their centralized digital currency projects. It is possible that very soon the pilot phase of their CBDCs will end and they will make the full launch, according to the central bank’s currency tracker, Atlanticcouncil.
- Currently, 87 other countries, which produce 90% of world GDP, are exploring the creation of a CBDC.
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