Banking News

Brazil’s Central Bank to study central bank digital currency

brazil real currency

On 21 August 2020, Brazil’s central bank announced its intention to set up a world-wide study on the issuance of central bank digital currencies (CBDC). Brazil recognizes the impact a digital Real could have on the country’s financial system, and as such wants to find a balance between using CBDC to improve society’s financial wellbeing, as well as tackling the potential risks which are ‘inherent in this new form of payment.’ 

The study’s general objective is to look into improving commercial transactions between private and public entities, nationally and internationally. Other features of the study include exploring a potential model for a CBDC, its scope, societal benefits, and national challenges. In terms of security, the study plans to examine various cybersecurity, data protection, and regulatory compliance risks. 

This is not the first time Brazil’s central bank has demonstrated enthusiasm in the newest technological trends. In April this year, it launched PIER, a blockchain platform used to seamlessly exchange data between regulatory authorities and financial institutions.

For Brazil in particular, the study will also determine the potential benefits of a digital currency in combination with Pix, their new 24/7 instant payment system, which commences operations this November. Pix was created to improve the efficiency and competitiveness of Brazil’s retail payment market. Brazil is eager to defend Pix and the Brazilian Payment System, having suspended WhatsApp payment processing in the country two months ago. As with CBDCs, Whatsapp payment processing in Brazil needs to undergo impact analysis concerning competition, efficiency, data privacy, and local regulatory compliance. 

Brazil is not the only country interested in issuing their own CBDCs. A survey conducted by the Bank for International Settlements (BIS), released in early 2020, shows that 80% of central banks around the world have started CBDC research, 40% of which have begun their own CBDC issuance experiments. It seems that central banks around the world have started to come to terms with this newest FinTech innovation.