Brazil’s central bank has announced plans to launch a digital currency pilot project to promote financial services in the country. The project, which will involve buying and selling federal public bonds among individuals, will be evaluated before public use of the currency starts at the end of 2024.
Digital Real to Reduce Costs
The digital currency, called the “digital real,” will be executed on distributed ledger technology to provide retail financial services. According to Fabio Araujo, coordinator of the initiative, this will reduce costs and improve financial inclusion for people. Services that were previously expensive and limited to banks, such as repo operations, could now be performed by anyone with a technology based on digital currencies.
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Araujo believes that there is a great potential for new service providers, fintechs, democratizing access to the market, and offering new services. The digital real could reduce the cost of credit and improve the return on investments. Banks have shown a lot of interest in the new tokenized world, Araujo added.
Not Meant to Leverage Digital Payments
The concept of the Brazilian central bank digital currency (CBDC) is not intended to leverage digital payments, as this is already being done on a large scale with Pix, which has been widely adopted in Brazil since its launch at the end of 2021. Bank deposits will continue to exist within the Brazilian CBDC, only being registered in a more modern environment. This means that financial institutions will not lose this source of funds for credit generation.
Brazil’s Central Bank’s move towards a digital currency is a step towards financial inclusion and reducing costs. The digital real is expected to provide a more modern environment for bank deposits, which would be beneficial for new service providers and fintechs. The potential for new services could democratize access to the market and improve financial services for people.
