Brazil’s central bank actively working of CBDC and crypto

The Central Bank of Brazil (BCB) has announced plans to start a pilot program of a central bank digital currency (CBDC).

Brazil’s central bank actively working of CBDC

In September, the BCB told the Brazilian Senate that it planned to launch the final version of a digital real in 2024, according to estimates made by Fabio Araujo, an economic adviser to the BCB, who added that the monetary authority would conduct initial tests in 2022.

Brazil’s central bank has also been discussing a bill to regulate digital assets as an investment vehicle, Campos Neto also said  without disclosing further details.

According to the BCB, Brazilians acquired $4.27 billion in cryptocurrencies in 2021. In August, Campos Neto said that Brazilians held about $40 billion in cryptocurrencies.

The BCB has now selected nine private-sector proposals to progress as it explores the opportunities and challenges presented by CBDC.

Banco Central do Brasil (BCB) is developing its thinking on CBDC by tapping into LIFT Lab (Financial and Technological Innovations Laboratory) – an ‘innovation ecosystem’ it manages alongside National Federation of Associations of Central Bank Servers (Fenasbac) to encourage FinTech-related proposals more broadly.

The ‘LIFT Challenge Real Digital’ (named after the real, Brazil’s national currency) – described as a collaborative environment seeking to identify the ‘fundamental characteristics of an infrastructure’ for a potential digital real – opened in late-November last year with a call for projects.

The BCB has announced that nine projects have been selected from 47 submitted proposals for follow-up in an implementation phase.

The selected projects focus on capitalising on opportunities such as programmable payments and solving CBDC challenges including offline payments.

The development comes just under 10 months after Brazil’s central bank published what it described as ‘general guidelines’ for a potential Brazilian CBDC.

At the time the BCB, which set up a CBDC working group in August 2020, said it wanted to ‘deepen discussion on the subject, including opening up dialogue with the private sector’.

The participants are a mix of cryptocurrency applications and enterprises.

They include:

• Aave – the public blockchain DeFi lending protocol
• Bitcoin Market, Bitrust and CPqD – DvP for crypto assets
• Banco Santander Brazil – using DvP for tokenized vehicles and other assets
• Febraban (Brazilian banking federation) – DVP for financial assets
• Giesecke + Devrient (G+D) – the central bank provider in a project for dual offline payments
• Itaú Unibanco, Brazilian stock exchange B3 and R3 – PvP for international payments
• Tecban and Capital – an e-commerce logistics solution that uses IoT
• VERT, Digital Asset and Oliver Wyman – rural financing
• Visa Brazil, ConsenSys and Microsoft – SME financing using DeFi

“[Crypto] is already starting to affect even the national accounts, which means it has become a relevant investment instrument,” Campos Neto noted, adding that crypto purchases are affecting Brazil’s import figures.

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