SANTIAGO - Chile's central bank said on Wednesday that although a digital currency could improve payment systems and mitigate risks, a deeper cost and benefit analysis is required and it would publish a new report towards the end of the year.

The bank said in September it would decide on issuing a "digital peso" in early 2022, and created a high-level group to guide its medium-term strategy on means of payment.

In a report, the central bank said the currency (MDBC) "would allow the benefits associated with digital transformation to be enhanced, while mitigating some of its risks," adding that the currency could help develop a more competitive, resilient and inclusive payment system.

"However, the report concludes that a final decision on this requires a more in-depth analysis of its costs and benefits, as well as a more complete comparison with other policy alternatives that address the same challenges," it stated.

The report stressed that the digital currency plan must prevent negative impacts on the financial system and monetary policy. The bank will hold seminars with specialists and conduct workshops with public and private parties in the financial system.

The report also stated that "it is necessary to start working now on building capacities within the bank and moving forward in the development of specific projects that allow different designs to be tested."

(Report by Fabián Andrés Cambero; Writing by Alexander Villegas; Editing by Richard Chang)