Economic Freedom
& Digital Currencies

The potential of Chile and Latin America in the 21st century is not only shaped by their natural resources and a growing services industry. The potential of Chile and Latin America lies in constitutionally guaranteed economic freedom, respected through the independence of the nations that make up the continent, as well as through the checks and balances that each of their institutions carries out autonomously within their respective countries. Sovereignty is an expansive concept intrinsic to freedom that goes beyond the territorial dimension.

Starting in 2029–2030, the European Union (EU) will implement the so-called Digital Euro (Central Bank Digital Currency, CBDC). Its implementation is questionable from an executive, legislative, and judicial standpoint (checks and balances) due to the democratic deficiencies that — in my view — the EU's supranational organization has demonstrated over time. The implementation of the Digital Euro is a consequence of its regulatory treatment depending on the structural design it adopts.

Let me explain. First, Art. 4(1)(44) defines negotiable securities and specifically includes an exception for "payment instruments." Since CBDCs are digital forms of fiat currency designed as a means of payment, they fall under this exception and are not considered securities. Second, Art. 4(1)(15) and Annex I, Section C define the list of "financial instruments" — such as stocks, bonds, and derivatives — regulated by MiFID II. CBDCs do not meet the criteria of any of these categories. Finally, under the new Markets in Crypto-Assets (MiCA) regulation, CBDCs are formally exempt from crypto-specific rules, as they are issued by central banks. In other words, CBDCs have been inserted into European regulation through exceptions and regulatory definitions.

What is not being said about CBDCs is the greater power that the European Central Bank (ECB) acquires to control electronic money — whether through expiration, restriction, freezing, devaluation, etc. (programmable money) — at the individual, national, and supranational level. The ECB has stated that it will not exercise the programmable money function. However, the very possibility of its existence raises doubts about its use in the medium or long term.

This could become even more serious if combined with the digital identity projects currently being implemented (already in force in the United Kingdom), due to the increased exposure to the concentration of power and control over European citizens. In this sense, both economic freedom and other constitutionally guaranteed freedoms would be put at risk. The outcome could resemble a centrally planned European economy, but in digital format: who can buy what, who can invest in what, who can travel where.

In light of the potential risks that a digital currency entails, Swiss voters approved a constitutional amendment on March 8th guaranteeing the availability of physical cash. This amendment requires the State to ensure that sufficient coins and banknotes remain in circulation. This does not preclude alternative digital money options from being discussed — as is currently the case with several Swiss banks' application to create a CHF stablecoin (Sandbox for a Swiss Stablecoin). This is an interesting initiative that keeps in perspective the market's appetite for stable digital currency alternatives such as stablecoins, without entailing the risks of a CBDC.

The stability, security, and economic freedom offered by Switzerland has had increasing repercussions in terms of European immigration in recent years. In this context, Swiss voters will decide in a referendum on June 14th of this year whether to cap the permanent resident population at 10 million by 2050, in order to reduce pressure on infrastructure and social services.

The situation described above may benefit Chile and Latin America from a positioning and investment standpoint in a context of economic freedom, with all that this entails. Europe's public debt, accompanied by high levels of illegal immigration over the past two decades, questions about the impartiality of its institutions, and the possibility of programmable money, all expose its future.

Learning from our own experiences and from those of others, while carefully observing the dynamics and strategies that tend toward the success of nations, is our task. The current juncture of Chile and Latin America could prove to be the perfect convergence for a new chapter in a success story.