Banxico’s digital currency would be based on the characteristics of the SPEI

The platform aimed at the implementation of a digital currency that Banco de México studies and develops (Banxico) is based on the characteristics that today the clearing and settlement infrastructure of the Interbank Electronic Payment System (SPEI) already has.

“That is, operation 24 hours a day, 7 days a week, instant payments, high availability, process standardization and robust measures for risk management and cyber-resilience,” he specified in the Annual Report on the exercise of the powers conferred by the Law for Transparency and Regulation of Financial Services, July 2020 to June 2021.

Wednesday night the federal government Through his Twitter account, he revealed that the central body will have its own digital currency in circulation in 2024.

“Banxico informs that by 2024 it will have its own digital currency in circulation, considering these new technologies and the next-generation payment infrastructure are of utmost importance as value options to advance the country’s financial inclusion,” the government explained to through the social network.

In his report, the Banxico It details that the project on a digital currency has among its objectives the opening of accounts for the registration of this, both for banked and unbanked people, thereby contributing to financial inclusion.

In addition, he points out, it seeks to expand the possibilities of payment in the economy under the premises of speed, security, efficiency and interoperability; as well as laying the foundations for innovation, by having a versatile asset from the technological point of view for the implementation of automation and programmability mechanisms for the use of financial services.

Development in three stages

The document highlights that the development of this project has been conceived in three stages, first resorting to the Digital Collection ecosystem, CoDi, in order to allow the making of transfers indicating only the beneficiary data, as is the case of a cell phone number, as well as the temporary maintenance of balances in favor of an unbanked user.

The central body points out that in a later stage, said functionality may evolve to a tokenized payment order scheme, so that a transfer can be subsequently redeemed; and finally, based on the elements developed in the two previous stages, the development of functionalities to establish digital currency registries in favor of users directly or indirectly at the central bank is contemplated.

With virtual assets, you must keep a healthy distance

Banxico, however, has been emphatic that with respect to virtual assets or crypto assets that are not from central banks, a healthy distance must be maintained from the financial system, since, due to its characteristics, it would have implications.

“Due to its characteristics, the intermediation with virtual assets by the Mexican banking system can have important implications for financial stability and in terms of consumer protection and household savings,” he highlights in his most recent Financial Stability Report.

There, he mentions that crypto assets have been characterized by being of a very volatile price, with high transaction costs and difficult to scale. “As the Financial Action Task Force (FATF) has pointed out, its ability to transfer value quasi anonymously can lead to the use of such assets as money laundering and terrorist financing tools, among others.”

On the other hand, it indicates that if they reached a considerable market share, they could imply some risks to financial stability, such as indirect exposures of the banking system to highly volatile assets, operational and cybersecurity risks, weakening of payment systems, impacts on capital flows and even bank disintermediation.

Based on this, the Banxico considers it necessary for virtual assets and the financial system to maintain a healthy distance.

“Specifically, it is considered that financial institutions in Mexico should not have positions in said assets; they cannot acquire them as collateral, and they should not finance their clients’ leveraged positions in virtual assets ”, he emphasizes.

In addition to this, he refers, there are two crucial elements to observe in the regulatory perimeter regarding this type of assets: the full identification of users, and the establishment of measures that prevent the extraction of resources as a result of cyberattacks or other illegal activities.

Central bank digital currencies renew the institution of money

The Bank for International Settlements (UNTIL for its acronym in English), has stated that the digital currencies of central banks that are currently transitioning from the conceptual phase to that of practical design, renew the institution of money with a new format conceived for the digital age.

In its 2021 Annual Economic Report, it highlights that digital currencies issued by central banks (CBDC for its acronym in English) would be based on the traditional functions of these bodies in the payment system which are: to ensure that they are firm and definitive; that there is enough liquidity to make it work; and that equal conditions prevail.

“The central banks They have a leading role so that innovation and technological advances can be translated into better forms of digital money, under the protection of the trust that the population has placed in the modern monetary and financial architecture, as well as the institutions that support it ”, considers Banxico .

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