• An official at the Bank of Mexico made the announcement. He stated that digital currency would not be replacing banknotes or coins.
• Mexico passed legislation in 2018 that regulates cryptocurrency trading. The central bank issued an additional regulatory framework.
• Despite the fact that the Mexican government doesn’t consider innovation important in the financial sector, the CBDC project is still being implemented.

According to reports, it is highly likely that the Bank of Mexico will issue its own central banking currency (or CBDC) according to the reports. 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. In a speech before the Senate Finance and Public Credit Commission the official stated that the bank was currently analyzing how to implement 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.

Flipside

• Mexico is home to the Fintech Law. This law regulates storage, sale, and management of digital assets.
• A statement was issued by the Central Bank of Mexico regarding crypto assets trading. It warns financial firms that they can’t transfer these risks to their end-users.

Financial innovation is a threat

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.

According to the official, a significant portion of Mexico’s economy was informal and excluded from the financial sector. Low bankarization makes it difficult to replace banknotes or coins 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 is a leftist politician who believes financial innovation does not need to be done.

From their perspective, the government should focus only on ensuring that the country’s income is maintained, through proper tax collection without evasion. Mexican president said that he would not be following in El Salvador’s footsteps.

What You Need to Care About

• China, South Korea and South Korea are among the 14 countries that have already made significant progress 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.
• Current research shows that 87 countries (which produce 90 percent of the world’s GDP) are also exploring creating a CBDC.

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