Gerardo LicandroBasel November 16The views in this presentation are those of the author and not of the Banco Central del UruguayCBDC Is this the futureOutlineof the presentationCentral Banks and Digit ID: 861554
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1 Uruguayan ePesoon the context of financi
Uruguayan ePesoon the context of financial inclusion Gerardo LicandroBasel, November 16(The views in this presentation are those of the author and not of the Banco Central
2 del Uruguay) CBDC: Is this the future?
del Uruguay) CBDC: Is this the future? Outlineof the presentationCentral Banks and Digital currenciesPeso in contextThe experience of the E PesoAimDesignResultsQuestions
3 in the Balance Central banks and Digital
in the Balance Central banks and Digital currenciesAre CBDC really necessary? What needs do we have that the current transaction tech does not deliver?Money already exists
4 in electronic formDo CBDCs improve fina
in electronic formDo CBDCs improve financial inclusion?Tax collectionTerritorial reachAre CBDCs more efficient? Costs of CashAre CBDCs safer?CBDCs might improve monetary
5 policy (interest bearing). peso in the U
policy (interest bearing). peso in the Uruguayan contextFinancial inclusion was declared a priority by the Uruguayan government, and the financial inclusion program was cr
6 eated in 2011Financial inclusion Law (19
eated in 2011Financial inclusion Law (19210) was approved in 2014TargetUniversal accessLabour market formalizationImproving payments system efficiencyMain measuresWage and
7 social benefits payable in (free) bank
social benefits payable in (free) bank accountsTax benefits for debit and credit card paymentsMandatory electronic payments in large transactions (effective 2018)Other me
8 asures of the programFacilitating access
asures of the programFacilitating access . Subsidy to POS investmentCompetition policies. Reduction in fees for credit and debit card transactions Fees on debit and credit
9 card reduced to 3,5 and 1,3% The numbe
card reduced to 3,5 and 1,3% The number of debit cards and electronic money instruments has doubled Access to banking system by firms has increased substantially As has
10 the number of atm’sand other cash d
the number of atm’sand other cash dispensers mechanisms POS terminals have almost doubled Both the number of operations and their amount have multiplied by six Electr
11 onic transfers multiplied by 5 and are e
onic transfers multiplied by 5 and are expected to spike next year Check usage is on the fall Despite the increase in accounts and cards, cash withdrawals are reaching a p
12 eak In the aggregate, there is a change
eak In the aggregate, there is a change in composition in the components of transactional money Issue, put in circulation and test in the real world a Central Bank Digital
13 Currency (CBDC) called ePesoPeso is the
Currency (CBDC) called ePesoPeso is the Uruguayan Peso in digitalWhat has Banco Central del Uruguay done? The Epeso in BIS’s money flower Peso:legal tender digital c
14 urrency issued by the Central Bankelectr
urrency issued by the Central Bankelectronic platform for the Uruguayan PesoPilot plan:needed for verification of technical issuesneeded to keep risks under strict control
15 Conditions set forth by the Central Bank
Conditions set forth by the Central BankNo cost for CB No cost for final usersA pilot plan for epeso Legalframeworkwassufficientfortheissuingelectronicbillscomplementbill
16 s Security Cyber and information risks h
s Security Cyber and information risks have been reasonably mitigatedOther risks (e.g. financial and reputation) have been reasonably hedged roposal and assessment Tecn
17 ology Successful testing of the system&#
ology Successful testing of the system’s component (ePeso production, digital vault, digital wallets, transactional system, infrastructures, etc.) and business contin
18 uity TimingIssue $20,000,000 Uruguayan p
uity TimingIssue $20,000,000 Uruguayan pesos in digital (ePeso)Transfer to virtual vaultTransfer to RedPagosfirst $7,000,000 ePesos Stage StageStarts Nov. 17 for 6 monthsA
19 ntelusers install ePeso app (digital wal
ntelusers install ePeso app (digital wallet)CashIn through RedPagos(incentives to the first 1000)Random, monthly, monetary incentives for active usersMake transactions Sta
20 geCashOut through RedPagosReturn of ePes
geCashOut through RedPagosReturn of ePesos to the BCU for destructionEvaluation of the Pilot and decision on future steps Issues digital bills Provides telecom network GSM
21 T (Global Solutions for Money Technologi
T (Global Solutions for Money Technologies)Supplies GDM/GEM, training, management and tech support Storage, management, control of circulation and call center RGC Managem
22 ent of users, transfers and transactions
ent of users, transfers and transactions CashandCashOutParticipants and their roles Description of the system 6 monthsNov. 17 to Apr. 18Peso bills are destroyed now) Limit
23 ed bill issuance(20 million) 10.000 mobi
ed bill issuance(20 million) 10.000 mobile phone users$30000 per wallet aprox. 1000 EUROS)$200000 for registered businessLimited Payment transactions in registered stores
24 and businessTransfers P2P among register
and businessTransfers P2P among registered users Pilot plan Instantaneous settlementDoes not require internet connection (just a mobile phone line)Anonymous but traceableu
25 sers’ wallets and encrypted Global
sers’ wallets and encrypted Global Enote Manager (GEM)Security improvements over cashPesos are secured at GEM even if users lose their phones or password of digital w
26 alletUnique, traceable bills prevent dou
alletUnique, traceable bills prevent doublespending and falsificationUnique bills difficult complete fungibilityGEM makes change automaticallyThe problem of the stock of f
27 ixed denominationsOriginally users would
ixed denominationsOriginally users would have been able to see the bills in the wallet, but that feature was not implementedCharacteristics of the system Experience and pr
28 eliminary evaluationVery positive learni
eliminary evaluationVery positive learning experienceDeveloped according to expectationsNo technical incidentsZero cost for BCU Age composition of epeso users Gender compo
29 sition of epeso users Monthly evolution
sition of epeso users Monthly evolution of transaction size Size of transactionsComputedforalltransactionsbiggerthan Gender and transaction size Computedforalltransactions
30 biggerthan Frequency of wallet uses Excl
biggerthan Frequency of wallet uses Excluding 0All December 2017 Number and sectors of participating firms 0102050607080 NovDicEneFebMarAbr sectors:Gas Stations Profession
31 als TransportImporters and DistributorsA
als TransportImporters and DistributorsAlimentaciónAutoservicesFitnessMedical ServicesOthers $ 6.337.507$ 7.707.700$ 116.459$ 7.571.373Importetransacciones Cash In Giros
32 Cobros Cash Out Number and type of trans
Cobros Cash Out Number and type of transactions 4,80923,6972,218Cantidadtransacciones Cash In Giros Cobros Cash Out Data suggests…Users have a profile compatible with
33 the already financially “included&
the already financially “included”There is evidence that epeso might have reached the non included deep UruguayNon trivial transactions mostly related to platfo
34 rm arbitrage. Sectors interested are tho
rm arbitrage. Sectors interested are those most concerned with the cost of existing platforms Questions in the balanceGeneral CBDC issuesLegal tenderWhat anonymity? The ti
35 me inconsistency of the anonymity promis
me inconsistency of the anonymity promiseInterest bearing? Substitutability with cash.What would be the cost and who will bear it?What parts of the system should be admini
36 stered by CBs?Some questions to discuss
stered by CBs?Some questions to discuss in Uruguay and other SOEsHow ePeso would affect existing business?Does this have implications for tax evasion?peso and financial in