Latin American Central Banks Advance CBDC Plans to Counter Stablecoin Growth

🔑 Key Takeaways

• Central banks in Latin America accelerate studies and pilots of Central Bank Digital Currencies (CBDCs).

• Goal: reduce dependency on dollar-backed stablecoins dominating the region.

• Potential to reshape financial sovereignty and payment infrastructure.

🗞 Main Story

Across Latin America, central banks are stepping up their exploration of Central Bank Digital Currencies (CBDCs) as dollar-backed stablecoins increasingly dominate cross-border payments and domestic remittances.

Countries like Brazil, Mexico, and Argentina are advancing pilot projects, while Chile and Colombia are in early feasibility phases. According to the Inter-American Development Bank, more than $150 billion in remittances entered the region in 2024, with an estimated 30% already conducted via stablecoins, bypassing traditional banks.

This has sparked alarm among regulators who fear that the growing reliance on U.S. dollar-denominated tokens undermines monetary sovereignty. By issuing CBDCs, Latin American monetary authorities aim to regain control over monetary flows, strengthen anti-money laundering oversight, and provide a state-backed digital alternative to private crypto.

Critics warn, however, that CBDCs may replicate the inefficiencies of legacy systems if not designed with interoperability in mind. Advocates argue that CBDCs, if integrated with blockchain rails, could offer a viable and cheaper alternative to stablecoins, particularly in cross-border transactions where remittance fees still average 5–7%.

Ultimately, the race between CBDCs and stablecoins will define whether Latin America can reduce its dependence on the U.S. dollar while also fostering financial inclusion for millions of unbanked citizens.

🔬 Expert Opinions

• Augusto de la Torre (ex-Chief Economist, World Bank Latin America):
  “Stablecoins reveal the appetite for digital money in the region, but CBDCs are essential for ensuring monetary sovereignty. The challenge is designing them to be competitive, efficient, and trusted by citizens.”

• Paula Santilli (CEO, PepsiCo Latin America, observer of regional fintech adoption):
  “The digitalization of payments is inevitable. Whether it comes from CBDCs or stablecoins, Latin American markets will demand faster, cheaper, and more transparent alternatives than traditional banking.”

🌟 Implications

The outcome of these CBDC pilots will determine whether Latin America can reclaim control from dollarized stablecoins and create a native digital monetary ecosystem. Success could provide a blueprint for emerging economies worldwide seeking to balance innovation with sovereignty. Cases like the $LIBRA scandal in Argentina show what happens when that balance does not exist.

🛬 Source

• Financial Times – “Latin American central banks accelerate CBDC pilots amid stablecoin surge”

• Inter-American Development Bank – “Digital currencies and remittance flows in Latin America”

📝 Editorial Opinion

El Salvador deserves recognition for its bold decision to adopt Bitcoin as legal tender in an effort to fight inflation and reclaim monetary sovereignty. Yet the current push by several Latin American nations to explore Central Bank Digital Currencies (CBDCs) must be approached with caution, as the design, objectives, and implications are fundamentally different.

Most international research suggests that CBDCs are neutral or marginal in their direct impact on inflation. However, the Latin American context requires a more skeptical view: in economies historically plagued by political instability, persistent fiscal deficits, and repeated episodes of excessive money creation, the risk that CBDCs exacerbate inflation through poor governance is considerably higher.

The most concerning scenarios include:

• Fiscal monetization: Governments may be tempted to issue CBDCs directly to finance deficits, effectively expanding the money supply in ways that quickly erode purchasing power.

• Abrupt migration into CBDCs: If citizens view CBDCs as safer than traditional cash or bank deposits, a massive shift could drain liquidity from commercial banks, triggering instability that undermines trust and fuels inflationary pressure.

• Politicization of monetary policy: CBDCs give central banks tools to distribute funds directly to individuals. In fragile democracies, this capacity could be abused for electoral handouts, threatening central bank independence and worsening inflation.

To be fair, advocates highlight potential stabilizing benefits: CBDCs could broaden financial inclusion, formalize the underground economy, reduce reliance on the dollar, and increase transparency in monetary flows. In theory, such advantages might help dampen exchange-rate–driven inflation.

Ultimately, the inflationary consequences of CBDCs are less about the technology itself and more about how governments and central banks choose to operate it. In Latin America, given its institutional fragility and history of inflationary cycles, the risks that CBDCs deepen economic instability outweigh their promised benefits. For now, observers can only hope that digital innovation will strengthen — rather than weaken — the region’s path toward stability.