Exploring the Potential and Pitfalls of Cryptocurrencies and CBDCs in Latin America and the Caribbean

This paper provides an overview of crypto assets and central bank digital currencies (CBDCs), highlighting their advantages and disadvantages. It then focuses on the recent experience of these technologies in Latin America and the Caribbean (LAC). LAC has seen a significant interest in unbacked crypto assets and stablecoins, with different countries adopting varying policy responses. For example, El Salvador has introduced Bitcoin as legal tender, while other countries have prohibited these assets due to concerns about their impact on financial stability, currency substitution, tax evasion, corruption, and money laundering. The paper also discusses the results of a survey on CBDC introduction plans and crypto asset regulation. Finally, it provides general lessons and policy recommendations for the region, including the regulation of crypto assets, digital currencies, cross-border payments, and the potential introduction of CBDCs.

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