The Central Reserve Bank of Peru has awarded its first contract for the development of its retail central bank digital currency (CBDC) trials. The winner is telecoms firm Viettel Peru. At this stage it hasn’t released additional details.
More than a year ago the central bank published a paper outlining its CBDC research. While the goals of its CBDC include improving financial inclusion and reducing the costs of cash distribution, it could prove challenging. In 2021 just under half the population had a bank account, but even amongst that group, cash usage still dominates.
The International Monetary Fund (IMF) has been helping Peru with its CBDC research and work. Its early investigations found that an aversion to fees contributed to the low levels of financial inclusion, alongside a lack of trust in digital instruments and the financial system as a whole.
It seems it’s not just end users that aren’t keen on fees. During interviews, one online merchant aggregator highlighted that it’s costly to participate in some of the payment systems. They perceived high fees as the incumbents imposing barriers to entry.
To address the user adoption challenge, the IMF recommended that the central bank explore co-creating the CBDC solution with an ecosystem of stakeholders.
Group discussions highlighted ten themes to explore in the CBDC implementation. These include:
- Business models for payment services
- Priority of use cases
- User adoption
- Elements of an optimal user experience
- Merchant onboarding
- Digital identity
- Critical enabling infrastructure
- Roles and responsibilities
- Interoperability
- CBDC data opportunities and privacy risks.
The IMF also suggested that the central bank take the process slowly and explore alternatives as well. For example, the central bank has mandated interoperability between existing digital wallet solutions.
Taking it slowly includes starting with low risk use cases such as payments to and from the government, low value payments or a wholesale CBDC. This was a small part of nine specific recommendations made by the IMF.
IMF’s CBDC work
Meanwhile, given the number of countries exploring CBDC and requesting help, the IMF is developing a CBDC Handbook. Last month a strategic review by the Independent Evaluation Office (IEO) of the IMF concluded that newer IMF policy areas, including climate change and digital money, were stretching the existing resources of the IMF. The IEO is concerned about whether it’s viable to maintain quality without more resources. However, it’s notable that Japan is funding the work on the CBDC Handbook.
