The Central Bank of Uruguay (CBU) announced plans for a limited, pilot test of a new digital currency on September 20 at a CBU conference that focused on the future of money in the nation’s financial system. The news follows the original announcement of an initiative to launch a digital currency by CBU President Mario Bergara in July.
The initial test will be limited to a small number of users, and the bank has not made information regarding the number of digital bills that will be issued during the testing process publically available.
The digital currency differs from current digital money-transfer applications. Bills will now be produced for and stored on cellular technologies and able to be passed from one user to another directly.
Bergara stated that, in the long-term, Uruguay will seek to replace physical money with this new digital currency, although plans currently remain in the early stages. While some oppose this replacement, Bergara argues that technological change is inexorable and that those clinging to the technologies of the past like physical currency will be set aside.
The new currency will be designed for use in the exact same capacity as physical money, although it will likely require additional security methods. The CBU identified proposed benefits of the digital system including higher transparency, efficiency, and production-cost reduction.
Other countries including Canada, India, and the U.K. are looking at the possibility of launching digital currencies as well, but Uruguay is the first to host a pilot program. Part of the push to launch a digital currency is predicated on the belief that such currencies will eventually be used worldwide. The CBU insisted that being on the forefront of this new technology will be good for Uruguay, but it will also involve trial and error as the bank finalizes technological and logistical aspects of the currency.