Brazil to Launch Experimental CBDC to Ensure More Secure & Private Customer Usage

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by Tolu Ajiboye · 3 min read
Brazil to Launch Experimental CBDC to Ensure More Secure & Private Customer Usage
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Brazil recently launched the experimental phase of its CBDC project, with plans to see adoption by the end of 2024. 

The central bank of Brazil has officially launched its experimental central bank digital currency (CBDC) to leverage financial services in the South American nation. The bank also hopes that the Brazilian CBDC will replicate the success of the country’s instant payment system, Pix.

Brazil Experimental CBDC Project Coordinator Weighs In

Fabio Araujo, the coordinator of the CBDC project at the apex bank, expects public usage of the CBDC to begin at the end of 2024. However, this anticipated adoption will occur only after a testing phase, including individual buying and selling of federal public bonds. Furthermore, the rollout of the digital currency is likely only after the project completes subsequent feedback evaluation.

According to Araujo, the decision by the central bank of Brazil to launch an experimental CBDC pilot project is practical. Established as a payment option on distributed ledger technology, the scheme looks to “support the provision of retail financial services.” Furthermore, this provision entails settlement via tokenized deposits in Brazil’s financial and payment system institutions.

Expounding on the CBDC as a mechanism that improves the overall Brazilian financial tapestry, Araujo explained:

“This could reduce the cost of credit, the cost of improving the return on investments. There is a great potential for new service providers, FinTechs, democratizing access to the market and offering new services. Banks are very interested in this new tokenized world; in every conversation we have, they show a lot of interest.”

On the CBDC as a means of engendering greater financial inclusivity within the Brazilian financial system, Araujo also stated:

“You have services that are very expensive to carry out, such as repo operations, which today are only for banks, but which could be performed by anyone with a technology based on digital currencies.”

However, Araujo pointed out that the concept of the Brazilian CBDC is not to leverage digital payments, which Pix already fulfills. Launched at the end of 2021 by Brazil’s monetary authority, the instant payment platform facilitates swift transfer executions on a large scale. Widely adopted in Brazil, Pix was announced in the summer of 2019 and became fully operational on November 16, 2020.

CBDC to Enhance Financial System Not Detract from It

According to reports, the experimental CBDC would not impair bank deposits in Brazil. This development also means that there would be no loss of the stated credit generation source.

Brazil first announced its intent to launch ‘real-world’ digital tests of its long-standing CBDC plan earlier last month. At the time, the central bank said the launch aimed to make the CBDC more secure and private.

Brazil is one of several countries around the globe in varying stages of CBDC implementation and adoption. A growing number of central banks seek to explore, introduce, or adopt digital currency as a viable option.

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