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The development of a Central Bank Digital Currency (CBDC) means several things to several people, and for Brazil, it is a broad complement to its already transforming payment ecosystem.
According to Fabio Araujo, an economist at the Central Bank of Brazil (CBB), the move to develop a Digital Real is fueled by many reasons. The reasons primarily involve providing “entrepreneurs with a safe and reliable environment to innovate through the use of programmability technologies, such as programable money and smart contracts.”
Fabio maintained the fact that the payment landscape in Brazil is already very advanced and the embrace of very fast digital payment models has been in the works for more than 20 years. While Fabio does not believe the payment landscape needs any revolutionary revamping, he believes the CBDC must add more value beyond efficient payments.
“In the context of a modern payment system, already available to the Brazilian population, a full-fledged CBDC must enable new functionalities beyond those brought by an instant payment arrangement. Therefore, the innovation tool for which the BCB envisions the greatest potential is developing a platform for smart payments,” he wrote in a recent publication from the Bank for International Settlements (BIS).
Embracing Crypto-Backed Innovations
In the paper, Fabio said cryptocurrencies are already a reality. He highlighted that the technologies are so novel that they can benefit a large number of citizens if given the appropriate regulatory oversight.
“Asset tokenisation and the issuance of digital assets is a reality. It is up to regulators to provide a safe environment so that entrepreneurs can propose innovations and a larger base of citizens can benefit from these technologies, without exposure to the uncertainties of an unregulated financial environment,” he posited.
While the CBB is still in the earliest stages of its Digital Real pursuit, it is one of the apex banks’ fast-tracking events in this light, which recently partnered with Mercado Bitcoin and Stellar blockchain networks to accelerate efforts on the project.
Image source: Shutterstock
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