The International Monetary Fund recently praised the Brazilian Central Bank’s digital currency, calling it the regulator’s “flagship initiative” to increase the penetration of digital financial services in Latin America.
“Brazil’s central bank is at the forefront of financial innovation,” the multinational agency said in a report, citing regulators piloting digital reals. The IMF highlighted the bank’s previous “hugely successful” instant payment system, Pix, which turned millions of Brazilians to the digital economy for the first time since 2020. This new CBDC project will build on that and reap the benefits of the emerging economy. We will utilize blockchain technology to promote further innovation.
In 2021, Central Bank Governor Roberto Campos Neto announced the Digital Real initiative, which is now in full swing. Despite a new president taking office this year in Brazil, the project roadmap remains steady and on track. The bank launched a pilot test in March to explore the technology and its potential use cases in the financial system. We plan to fully release CBDC by the end of next year.
Various banks around the world are researching the benefits of cryptocurrencies and blockchain technology. However, the IMF sees Brazil’s CBDC project as something different. While many regulators in emerging markets prioritize financial inclusion, the fund claims Brazil’s Pix system already addresses this aspect. The fund said Digital Real will introduce an additional layer of innovation as a “smart platform” that seeks to leverage the benefits of public blockchains in a safe and trusted environment.
IMF supports CBDC
The fund is particularly supportive of CBDCs in recent years, especially since the rise of stablecoins has created a threat to fiat currencies. He argues that CBDCs could potentially share many of the advantages that make stablecoins so attractive in today’s developing markets.
A recent report argued that stablecoins are more attractive than cryptocurrencies due to their lower volatility. The Bank for International Settlements, a central bank-owned institution, said CBDCs are a “threat to fiat currencies in the absence of CBDCs” and initiatives like Pix are a “line of defense” against cryptocurrency use. .
“Brazil’s local initiatives have come about well in line with the guidelines of international organizations,” ABFintechs executive director Carlos Augusto de Oliveira said in an interview. Private companies work closely with governments. center A bank announces a new project. “The market is cooperating with the idea that a central bank-controlled convertible stablecoin will be launched by the end of 2024.”
However, the digital real was not initially released to the public. End users may only indirectly access through financial and payment institutions. “The CBDC’s goal is to provide a secure platform for the private sector to use new technologies to create innovative solutions,” the IMF said.
“CBDCs and the digital economy as a whole can provide access to the digital world to the unbanked,” Carlos Alberto Durigan, an associate researcher at the UCL Blockchain Technology Center, told Fintech Nexus. He said the technology would reduce transaction costs for individuals and businesses, reducing reliance on branches and physical currency.
Debate over a digital euro heats up
The debate over central bank-controlled digital currencies is heating up around the world. Several regulators, including the European Central Bank (ECB), have explore idea. Recently, the European Commission released a draft bill on the digital euro as an alternative to cash.
ECB President Christine Lagarde said earlier this year that a digital euro could provide reliable payments in the eurozone without replacing physical cash. The move aims to preserve the euro’s importance while embracing the benefits of digital currencies.
“When you look at your wallet, or your phone, or the applications and cards you use to pay, you quickly realize that those payment instruments are not necessarily European,” she said. Virtual Panel on Central Bank Digital Currencies hosted by the Bank for International Settlements. “So we just have to be careful,” she added. “Some people call it autonomy. I like to call it resilience because that’s what it really is.”
