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The Digital Peso proposal from Carlos Maria De Los Santos sounds like a viable alternative for countries looking at floating their own CBDCs.
Carlos Maria De Los Santos, a former Argentine banker has unveiled a proposal that may help the country amidst its highly inflammable economic tendencies. According to De Los Santos, Argentina could adopt the Digital Peso as a single monetary and payment system in replacement of cash.
She justified the proposal by pointing out the many benefits this will afford the economy if implemented. According to her position, adopting a Digital Peso will help register most transactions on a system that can easily be reviewed by tax authorities. This approach, she said, is billed to prevent the incidence of tax evasion that is eating deep into the Argentine economy at the moment.
Through the Digital Peso and the digitization of the economy, take evasion can be cut down by 50%, and the surplus that will be retained through tax remittance can increase by 20% on an annualized basis.
Argentina is bedeviled by a fast rate of inflationary growth, a trend that has led to the suppression of economic activities, the devaluation of the Peso fiat currency, and the reduction in the purchasing power of the populace as a whole. De Los Santos is optimistic that implementing her proposal and everyone getting to pay taxes as required, it can further lead to lower taxes for all stakeholders.
The Digital Peso proposal is also positioned as an avenue to give bank depositors higher interest rates. This is because more money will be injected into the economy since the new legal tender will be the only avenue to transact. Fiat pesos and US Dollars or other foreign currencies can be deposited in a bid to receive the Digital Peso that can be used for transactions.
In De Los Santos’s argument, the Digital Peso can enable a large amount of capital retention in the economy which will be good for all stakeholders.
Is the Digital Peso Model Workable in All Economies?
The Digital Peso proposal from Carlos Maria De Los Santos sounds like a viable alternative for countries looking at floating their own Central Bank Digital Currencies (CBDCs). A major difference in De Los Santos’ proposals from what we have seen thus far amongst top Central Banks is that the majority with a vested interest in CBDCs are developing this new money with the plans for it to co-exist with the fiat version.
Many Central Banks have even confirmed that the Digital versions of their currencies will seek to complement and not replace cash.
This contradicts the Digital Peso proposal which seeks to be the sole and dominant legal tender in a bid to achieve the objectives of tightening monetary losses due to tax evasion. Whether Argentina can explore other avenues to curb this tax evasion menace is not the point, rather, lawmakers will need to ascertain whether the approach of a single currency in the economy is the right approach when other factors are considered.