In general, I see some advantages with having rules that are hardwired in place so that adjustment of the parameters of the tool – say, limits on the loan-to-value ratio – happen automatically in response to sectoral developments. Automatic rules that are always in place have several advantages over discretionary measures that are implemented, ex post, only after some potential source of financial stability risk has been identified. First, they are transparent and will work more quickly. Second, they avoid some of the problems associated with announcing that a new measure is going to be put in place. When implementing a new measure there will always be some reluctance to overcome in terms of deciding whether it is necessary. Also, there may be political opposition to imposing a new measure. For example, during the housing boom, limits on subprime lending would undoubtedly have provoked the objection that the regulators’ actions would limit home ownership for low-and moderate-income families. Imposing automatic, countercyclical standards also has this difficulty to some degree. But I think it is much less severe because at the time such standards are put in place, they generally will not be binding and it will be unclear whether they will necessarily become either more stringent or more binding in the future. In other words, the rule’s potential impact will be highly speculative and uncertain at the time of implementation. This may lessen the political opposition to putting such a rule in place.
d. Finally, there are some additional risks to take into account: Reputational risk if CBDC is not widely adopted by the public, or if privately issued currencies gain more traction; Financial exclusion of the “nontech” persons? Even though many CBDC experiences are from developed economies such as Canada and Sweden, there are also some experiments in developing economies such as China, Colombia and Uruguay. For emerging economies, where persons tend to be financially underserved, is CBDC the most efficient way to solve this problem? Other alternatives, such as fast payments solutions, can be evaluated. Page 9 of 11  Central Bank of Chile September 2019  In conclusion: a. Blockchain technology implies opportunities and concerns that should be carefully addressed: Which is the goal of technology adoption? b. This is especially important in the case of CDBC: financial inclusion, response to new forms of e-money, facilitate wholesale payments, faster payments, cross-border payments? c. CDBC does not necessarily need blockchain. Our understanding is that DLT or Blockchain technologies are more useful when several participants of a given system need to have access to a ledger of information and/or when participants do not necessarily trust each other (and therefore proof of work requirements make the register almost immutable). However, when a Central Bank issues its currency -- either in physical or digital format -- trust should be a given. Also is far from obvious that all market participants should have access to sensitive information such as all transactions in which the CBDC was used.