The central bank in Argentina is considering the introduction of a central bank digital currency (CBDC). The Digital Peso will make tax collection easier, the bank said.
Speaking on a local television program, Juan Agustín D’Attellis Noguera, a director of Banco Central de la República Argentina, said the idea of a CBDC proposed by the Minister of Economy Sergio Massa as the solution to country’s woes was a good idea.
Massa, who doubles as a presidential candidate, on 2 October pledged to launch a CBDC if elected to “solve” Argentina’s long-lasting inflation crisis. Argentina is one of the Latin American countries facing economic problems, with its currency the Argentinian Peso suffering massive inflation.
Noguera said he believed that the digital Peso could stabilize Argentina’s economy as early as next year. He further stressed that the traceability feature of a CBDC could make tax collection more efficient, as users can’t hide their economic activities.
“By having traceability of operations with a digital currency because it is not known who does them, but there is evidence that they were done, you broaden the tax base. This will allow you to raise more without having to raise taxes and even lower them,” Noguera said.
The Controversies Around CBDCs
CBDCs are becoming increasingly popular among central banks around the world, as cryptocurrencies become more popular too. While most central banks intend to issue CBDCs as alternatives to crypto, some like Argentina have a different reason in mind.
Nonetheless, there are controversies surrounding CBDCs because of their potential to be used as surveillance tools. Transactions with CBDCs are not just traceable, they can be traced to a person, unlike cryptocurrencies that don’t reveal the identity of a user.
It is the traceability that Noguera believes can help with tax collection, but it can also be used to violate users’ privacy, which is why many crypto supporters are against the idea. Similar arguments are ongoing among lawmakers in the U.S. and other countries concerning the idea.
Some CBDCs Getting Rejected
While Argentina is considering launching its own CBDC, Nigeria, one of the first countries to launch a CBDC known as the eNaira is considering putting it aside.
The bank in a report said the eNaira is bad for the country’s financial stability, as Naira converted to eNaira is unavailable to commercial banks, thus tying down money that should be in circulation.
Like Argentina, Nigerian Naira has suffered due to inflation for years, and the eNaira was introduced by the past government as a strategy to strengthen the currency. On the contrary, the situation has only worsened, with negligible adoption of the eNaira.
