A New Layer of Financial Infrastructure

The significance of stablecoins does not arise solely from their ability to decrease transaction costs but also from their ability to change the way modern currency is moved. When established on blockchain technology, stablecoins provide a new economic paradigm that is programmable, global and accessible. Picture this as a digital public roadway: blockchains act as the road system, open, neutral and shared, while stablecoins become the standardised vehicles that travel along them. These tokens can travel freely between users, platforms and applications.

What matters is not who issues a stablecoin, whether a fintech start-up, a global payments company, or a traditional institution, but whether it can be used across systems. As long as it is built to standard, it can flow. Much like any compliant car can use a public road, any wallet or app that supports a blockchain can send and receive stablecoins. This creates new possibilities for financial access, particularly for businesses and users priced out of legacy systems.

Chile’s Legal and Institutional Pivot

In Chile, this is no longer a hypothetical scenario. In recent years, a series of legal and institutional reforms, most notably the Fintech Law (Law No 21.521), have positioned the country to integrate digital assets into its regulated financial system. This marks a significant shift for a jurisdiction historically known for its conservative approach. While the Central Bank remains the sole issuer of legal tender and commercial banks continue to create money through credit, subject to reserve requirements, a new form of “digital money” has begun to gain regulatory recognition: fiat-backed stablecoins operating on distributed ledger technologies (DLTs).

Chile’s legal framework, particularly the amendments introduced by the Fintech Law to Law No 20.950, which authorises the issuance and operation of payment instruments with provision of funds by non-bank entities, makes this shift tangible. It also builds on other key regulations relevant to the functioning of Chile’s payment system, including those that govern the powers of the Central Bank and the General Banking Law. Specifically, Law No 20.950 empowers non-bank entities to issue and operate payment instruments. The Fintech Law extends this by explicitly recognising digital representations of value recorded on DLTs or similar technologies, provided they are backed by fiat currency and have a clearly defined value. This legal acknowledgment paves the way for regulated stablecoins to operate as legitimate means of payment within Chile’s financial ecosystem.

As stated in the legislative history of the Fintech Law, the purpose of this regulatory framework is to address a concrete issue: “to prevent a company from receiving money from the public without complying with applicable regulation, simply because that money is represented in a token”. In addition, it allows the Central Bank to recognise payment systems that rely on digital representations of money rather than traditional account balances and extends the Bank’s foreign exchange regulatory powers to international transactions carried out using digital forms of money.

This legal evolution does more than simply acknowledge the existence of stablecoins, it creates a defined and functional space for them within the country’s regulated payment infrastructure. By granting legal status to fiat-backed digital tokens that meet specific standards, Chile is not only enabling innovation but also ensuring these innovations are compatible with public oversight and systemic trust.

A Third Monetary Layer

This legal innovation relates to a wider monetary structure. Currently, only Chile’s Central Bank has the authority to create legal tender. Banks then create money by lending, a process which occurs under specific regulations. Stablecoins create money from within a new third layer. Stablecoins are not legal tender, nor are they a bank deposit. Instead, they are merely a digital representation of money, created by a non-bank entity. Law now recognises them as part of the monetary ecosystem, as long as they are technically robust, fully backed, compliant and adhere to the standards set by the Central Bank.

This third layer complements the traditional roles of central bank money and commercial bank credit, offering an additional tool in the architecture of modern financial systems.

Fintech Law’s Functional Approach to Crypto-Assets

Chile’s Fintech Law was designed to provide a flexible and inclusive regulatory framework for technology-based financial services. It introduces a formal definition of crypto-assets under Article 3 No 3: “Virtual financial assets or cryptoassets: digital representation of units of value, goods or services, other than money, whether in local currency or foreign exchange, that can be transferred, stored or exchanged digitally.” These are presumed to be financial instruments unless otherwise exempted.

The law, under Article 3 No 8, defines a financial instrument as “any title, contract, document or incorporeal good, designed, used or structured with the aim of generating monetary returns, or representing an outstanding debt or a virtual financial asset”. This broad definition allows the regulator to include most crypto-assets within the scope of capital market supervision.

For instance, an asset does not have to use distributed ledger or blockchain technology to be considered a crypto-asset according to the law. This implies that this category may possibly include other kinds of digital records. However, under certain rules, stablecoins, and particularly those backed by fiat and recorded on DLT, may also be classified as digital money equivalents.

Distinguishing Between Financial Assets and Digital Money

Importantly, the Fintech Law and its associated reforms also draw a regulatory line between crypto-assets used as investment vehicles and those used as digital money. The former are regulated by the Financial Market Commission (CMF). The latter, namely, stablecoins backed by fiat and operating in centralised models, fall under the regulatory scope of the Central Bank. The amendments to Law No 20.950 and the Organic Law of the Central Bank specify that these digital units must be recorded on systems like blockchains, backed by money, and compliant with operational and security standards defined by the Central Bank.

In practical terms, this means that stablecoins, defined under the amended legal framework as digital, electronic or computer-based representations recorded through systems using distributed ledger technologies or analogous mechanisms, of units whose value is determinable and backed by money, can now be integrated into Chile’s regulated payment ecosystem.

Beyond Stablecoins: A Broader Financial Innovation Agenda

The Fintech Law also introduces an open finance system in Chile, which mandates interoperability and data sharing among financial institutions through standardised APIs. This includes banks, fintechs and payment service providers, and potentially encompasses stablecoin-based payment activity. The goal is to enhance competition, transparency and consumer choice by enabling seamless integration between accounts, platforms and services.

The law further regulates crowdfunding platforms, investment advisory services, alternative trading systems and custody of financial instruments. In doing so, it creates a unified licensing and supervisory regime for a broad spectrum of financial innovation.

How Chile Differs From Global Models

While jurisdictions such as the European Union have adopted detailed frameworks (like MiCAR) that categorise crypto-assets into utility tokens, asset-referenced tokens and e-money tokens, Chile takes a more functional approach. Rather than establishing distinct taxonomies, Chile assumes financial treatment by default and places fiat-backed stablecoins under the regulatory scope of the Central Bank. This is complemented by a clear institutional separation of roles between the CMF and the Central Bank.

In contrast, the United States continues to face regulatory fragmentation, with diverging interpretations from agencies such as the SEC and CFTC. Against this backdrop, Chile’s model, though simpler, is not free of challenges. It does not offer the conceptual coherence of MiCAR’s classification system, but instead adopts a pragmatic regulatory structure focused on function and use. This approach supports broader policy objectives like fostering innovation and promoting financial inclusion. While it may introduce some interpretive ambiguity, it also provides flexibility for future regulatory adaptation and reflects the underlying intent of Chile’s recent legal reforms.

While it may introduce some interpretive ambiguity, it also provides flexibility for future regulatory adaptation and reflects the underlying intent of Chile’s recent legal reforms.

Still, this ambiguity represents a future challenge: as crypto markets evolve, the lack of rigid classifications may require Chilean regulators and courts to clarify boundaries case by case, especially when stablecoins adopt new functions beyond payments.

Bridging the Gap Between Promise and Practice

While stablecoins are often presented as a breakthrough for low-cost, programmable money, their real-world use remains limited. Most of today’s stablecoin payment networks operate as “closed loops”; systems in which transactions can only occur within a specific platform or provider. These resemble siloed financial environments, like store credit cards or early internet platforms.

According to the Chainalysis 2024 Geography of Cryptocurrency Report, four of the top 20 countries in global crypto adoption are in Latin America, where stablecoin-based remittances are gaining momentum amid ongoing currency volatility. On local exchanges, year-over-year stablecoin transaction volume grew by over 200%, significantly outpacing Bitcoin, Ether, and other cryptocurrencies. Still, their most common use case remains business-to-business cross-border payments, not everyday consumer transactions.

This points to a broader challenge: despite the open and permissionless nature of blockchain infrastructure, most stablecoin systems remain fragmented and non-interoperable. What’s missing is a way to allow stablecoins to flow freely across platforms, much like how emails can be exchanged regardless of the provider. This global fragmentation highlights the need for regulatory frameworks that prioritise openness and interoperability, something Chile is already moving toward.

Chile’s regulatory model offers a meaningful alternative. Rather than replicating these closed and fragmented systems, Chile has laid the groundwork for open and interoperable stablecoin use. By legally recognising fiat-backed stablecoins as legitimate payment instruments and requiring financial institutions to share data and integrate via standardised APIs under its open finance framework, Chile is enabling stablecoins to function across different platforms, wallets and institutions. This approach allows them to operate not just as isolated digital tokens, but as real components of a national payment infrastructure, capable of supporting broader economic inclusion and innovation at scale.

Concrete Use Cases and Economic Impact

The practical benefits of stablecoins are most visible in high-friction environments. In Latin America, where remittances, cross-border trade and inflation volatility are everyday challenges, stablecoins offer a low-cost, programmable and stable means of payment. In Chile, a corner store or coffee shop accepting stablecoins could receive instant settlement and potentially integrate into accounting software via API. With open finance infrastructure, these businesses could connect stablecoin wallets to bank accounts, tax systems and B2B payment platforms. In this way, the stablecoin doesn’t just lower costs, it becomes part of a broader, modular ecosystem for small businesses and startups.

Challenges of Custody and Insolvency: A Gap to be Addressed

Despite the legal progress, Chile has yet to address in detail the regulatory treatment of crypto-asset custody, particularly in cases of insolvency. In jurisdictions like the UK, courts have recognised crypto-assets as a form of property and emphasised the need for segregation of assets and fiduciary responsibility in custodial arrangements. Similarly, under MiCAR, stablecoin custodians must implement strict segregation, maintain clear records and be liable for the safekeeping of client assets. In Chile, however, this area remains largely unregulated, and stablecoin custody is often informally equated with private key possession, an approach that could prove risky in scenarios of platform failure or legal dispute. As such, those seeking to invest in these assets should seek proper advice from professionals who understand the particular nature of crypto-assets.

Adoption Trends and Regional Relevance

According to the 2024 Geography of Cryptocurrency Report by Chainalysis, Latin America is emerging as one of the fastest-growing regions for stablecoin usage. Countries facing inflation or currency volatility are increasingly adopting dollar-pegged stablecoins like USDT and USDC for remittances, savings and business transactions. The report highlights that while institutional crypto adoption in the region is still evolving, consumer-driven use of stablecoins is already deeply embedded in the financial behaviour of many Latin Americans.

Chile shows steady and growing interest in stablecoin-based applications. The legal recognition of stablecoins under Chile’s Fintech Law places the country in a strong position to support safer, regulated alternatives to informal dollarisation mechanisms. As regulatory clarity continues to spread across the region, Chile’s experience may contribute to a broader dialogue on how to bring stablecoin-based financial services into the formal economy without undermining macroeconomic stability.

A Rare but Concrete Integration

Whether Chile’s model becomes a blueprint for others remains to be seen, but it undeniably reflects a meaningful step toward modernising financial infrastructure without compromising institutional discipline, a balancing act few jurisdictions have managed to pull off so far.

Chile’s experience demonstrates that regulatory innovation is not only about the technology itself, but about designing institutional arrangements that foster trust, interoperability and responsible growth.