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© 2023 International Monetary Fund
WP/23/37
IMF Working Paper
Western Hemisphere Department
Crypto Assets and CBDCs in Latin America and the Caribbean: Opportunities and Risks
Prepared by M. Appendino, O. Bespalova, R. Bhattacharya, JF. Clevy, N. Geng, T. Komatsuzaki, J. Lesniak, W. Lian, S. Marcelino, M. Villafuerte, Y. Yakhshilikov
Authorized for distribution by Patricia Alosnso-Gamo
February 2023
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT: After providing a general overview of the nature, pros, and cons of crypto assets and CBDCs, this paper focuses on documenting their recent experience in LAC. The region records a high interest in unbacked crypto assets and stablecoins and its authorities’ policy responses have varied substantially, ranging from the introduction of Bitcoin as legal tender in El Salvador to their prohibition in many other countries worried about their impact on financial stability, currency/asset substitution, tax evasion, corruption, and money laundering. This paper also describes briefly the results of a survey on CBDCs’ introduction plans and crypto assets regulation. Finally, this paper presents some general lessons and policy recommendations for the region on the regulation of cypto assets, digital currencies and cross-border payments, and on the potential introduction of CBDCs.
RECOMMENDED CITATION: Appendino, M., O. Bespalova, R. Bhattacharya, JF. Clevy, N. Geng, T. Komatsuzaki, J. Lesniak, W. Lian, S. Marcelino, M. Villafuerte, Y. Yakhshilikov, 2023, “Crypto Assets and CBDCs in Latin America and the Caribbean: Opportunities and Risks”, IMF Working Paper 23/37
| JEL Classification Numbers: | E50, E58, F28 |
| Keywords: | Digital money; cryptocurrency; stablecoins |
| Author’s E-Mail Address: | mappendino@imf.org; obespalova@imf.org; rbhattacharya@imf.org; JClevyAguilar@imf.org; ngeng@imf.org; tkomatsuzaki@imf.org; jlesniak@imf.org; wlian@imf.org; smarcelino@imf.org; mvillafuerte@imf.org; yyakhshilikov@imf.org |
| JEL Classification Numbers: | E50, E58, F28 |
| Keywords: | Digital money; cryptocurrency; stablecoins |
| Author’s E-Mail Address: | mappendino@imf.org; obespalova@imf.org; rbhattacharya@imf.org; JClevyAguilar@imf.org; ngeng@imf.org; tkomatsuzaki@imf.org; jlesniak@imf.org; wlian@imf.org; smarcelino@imf.org; mvillafuerte@imf.org; yyakhshilikov@imf.org |
Title Page
WORKING PAPERS
Crypto Assets and CBDCs in Latin America and the Caribbean
Opportunities and Risks
Prepared by Appendino, M., O. Bespalova, R. Bhattacharya, JF. Clevy, N. Geng, T. Komatsuzaki, J. Lesniak, W. Lian, S. Marcelino, M. Villafuerte, Y. Yakhshilikov 1
Contents
INTRODUCTION
CRYPTO ASSETS AND CBDCS: AN OVERVIEW
Definitions and Basic Taxonomy
Potential Implications of Unbacked Crypto Assets
Potential Implications of Stablecoins
Potential Implications of CBDCs
Cross-Border Payment Issues
RELEVANT EXPERIENCES IN LATIN AMERICA AND THE CARIBBEAN
Crypto Assets
Existing Regulations/Restrictions in the Region
Stablecoins
Energy Costs and the Potential Taxation of Crypto Assets’ Mining: the Case of Paraguay
Regional Dollarization Experiences and Potential “Cryptoization”
CBDC
LESSONS AND POLICY RECOMMENDATIONS
References
BOX
1. The Collapse of FTX
FIGURES
1. Financial Access in Latin America and the Caribbean (LAC), 2021
2. Number of Correspondent Banking Relationship
3. Financial Inclusion and Remittances in Selected LAC Countries
4. Monthly Share of all Web Traffic to P2P Cryptocurrency Platforms (April 2019
5. Crypto Adoption and its Drivers in Latin America
6. LAC Survey Responses on CBDCs
7. LAC Survey Responses on CBDCs (continuation)
8. LAC Survey Responses on CBDCs (concluded)
9. Brazil: Number and Cost of Payment Transactions
TABLES
1. Association of Country Characteristics with Interest in Bitcoins
2. Drivers of Interest in Bitcoins
ANNEXES
I. Regulation of Crypto Assets in LAC
The authors would like to thank Itai Agur, Marwa Alnasaa, Arvinder Bharath, Hector Carcel Villanova, Maria Fernanda Chacon, Dimitris Drakopoulos, Pablo Druck, Juan Pablo Erraez, Stephanie Forte, Daniela Gallardo, Rishi Goyal, Federico Grinberg, Dirk Jan Grolleman, Kathleen Kao, Alexander Klemm, Ashley Lannquist, Fabiana Machado, Manabu Nose, Jonathan Pampolina, Renato Perez, Hector Perez-Saiz, Lorena Rivero del Paso, Robin Sykes, Gerardo Una, Dmitry Vasilyev, Alok Verma and Helen Wang Wagner for very useful comments and suggestions.