Brazil’s central bank moves closer toward CBDC launch in 2024

Getting your Trinity Audio player ready...

Brazil will explore the possibility of a central bank digital currency (CBDC) in 2024, as disclosed by the country’s central bank President Roberto Campos Neto in a conference hosted by news outlet Poder 360.

Campos revealed that the Central Bank of Brazil will conduct a pilot program with selected financial institutions before a full-scale launch. In terms of design, it appears that Brazil’s CBDC will encourage commercial banks to tokenize their assets, noting that “it inherits all the regulation that already applies to deposits.”

The head of the central bank remarked that the technical design of the CBDC received a commendation from the International Monetary Fund (IMF), noting that other central banks should adopt it. According to an IMF report, Brazil’s CBDC does not negatively affect the balance sheets of financial institutions and aligns perfectly with existing monetary policy.

Brazil’s decision to experiment with CBDCs hinges on the need to promote financial inclusion in the country and to support existing payment mechanisms.

“Greater inclusion, lower cost, intermediation, competition with reduced barriers to entry, efficiency in risk control, monetization of data, complete tokenization of financial assets and contracts,” said Campos. “This is what we see in this digital economy in Brazil.”

In March, the central bank selected nine partners to assist it in developing its CBDC. Mercado Bitcoin, Santander Brasil, and Aave were among the chosen firms, as the bank confirmed that it received over 48 project proposals from reputable firms versed in blockchain technology.

“Given the large number of projects of relevance and interest for the development of the real digital initiative, the selection process sought a balance between the diversity of the portfolio of proposals submitted to the lab and the need for detailed monitoring of the chosen projects,” said the bank.

The wild CBDC race

Developments of CBDCs have reached a heightened pace in recent months, spurred by the need to catch up with the industry leaders like the Bahamas, Nigeria, and Jamaica. China’s digital yuan has emerged as the most widely anticipated CBDC, given the impressive metrics around it. Less than 24 months after the start of the pilot, the digital yuan has surpassed $13 billion worth of transactions in under 360 million transactions, with 5.6 million local merchants accepting the CBDC.

Central banks are adopting different strategies suited to the peculiarities of their economies, with some opting for retail offerings over wholesale CBDCs. Despite the schism, nearly all central banks are considering using CBDCs to improve cross-border payments.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

Watch: The BSV Global Blockchain Convention presentation, CBDCs and BSV