Colombian economists from the Central Bank of Colombia are calling for caution in the way countries are adopting the use of digital currencies in their financial landscape. They advocate for the central bank to put stablecoin regulation ahead of its hasty pursuit of Central Bank Digital Currencies (CBDCs). This recommendation comes when cryptocurrency interest rises, and Colombia heavily depends on cash transactions.
In an official report published on the BlockWork platform, the Economist said that in Colombia, nearly 75% of retail transactions are still paid for in cash, underscoring the country’s strong reliance on tangible money. The report highlights that a CBDC might be essential in asserting central bank money as the primary currency if this cash usage reduces.
The report also warned that cryptocurrencies, unlike conventional money, can undergo high-value fluctuation, limiting their usefulness as a trusted store of value. The economists also pleaded with regulators to pay attention to the fact that stablecoins are intended to maintain a stable value by being anchored to underlying assets,
They compared Colombia and nations where digital payment systems are widely used, such as India, China, and the United Kingdom. According to this trending report, countries have embraced digital transactions, making them integral to daily life. They said that in the case of Colombia, the report indicates that both stablecoins and a well-regulated CBDC could facilitate a steady shift toward digital transactions.
The Report Reflects On The Need For Cryptocurrency Adoption
The report by the economists emphasizes the complex factors influencing CBDC adoption, pointing out that various countries have different justifications for considering their adoption. It further said that a CBDC has been adopted in the Bahamas for a particular reason.
However, these economists caution that each nation must evaluate its unique economic and financial landscape before determining the suitability of a CBDC rollout. The report also advised that by focusing on the regulation of stablecoins, the central bank could mitigate some of the risks associated with volatile cryptocurrencies while preparing the groundwork for a future CBDC, should circumstances evolve.
Different analyses have started springing up since the report was released in the early hours of Friday. Speaking on the trend, BlockWork’s Casey Wagner explained that the ongoing dialogue among Columbia’s economists, policymakers, and financial institutions will be crucial in shaping the nation’s monetary landscape. Wagner added that with the global financial ecosystem continuously evolving, Colombia stands at a crossroads where measured decisions today could have far-reaching implications for tomorrow’s economy.
The report also stated that while the stablecoins can be very useful to any country, the privacy of the user must be taken seriously. It also added that this is important especially in the absence of proper regulation and government supervision.
