Real digital pilot should work from March – 02/27/2023 – Market

The pilot project for the digital real should be off the ground in March and, if there is security, the Brazilian digital currency may be working “at its maximum” by the end of 2024, said this Monday (27) the president of the Central Bank, Robert Campos Neto.

Campos Neto participated in the event “The digital transformation and democratization of the financial market”, held by IDP.

The Brazilian digital currency, an extension of the real, is being developed by the Central Bank. The previous estimate was that the start of the pilot phase would take place at the end of the first half, but, this second, Campos Neto said that this will still happen this quarter.

“In terms of next steps, next month we will already have the pilot working. Next month we will already have the digital currency pilot”, said Campos Neto. “Brazil will be one of the first countries in the world to do this. We will move forward with the pilot as we become more secure. The idea is to have something working at the most by the end of 2024”, he added.

At the event, Campos Neto stated that the digital currency will have all the features to prevent money laundering. Furthermore, he argued that there is no need for a new regulation for the digital real.

“If it is a tokenized deposit, it inherits all deposit regulation. Imagine making a whole new regulation, a new financial framework for a new currency in circulation?”, he said.

Central bank digital currency works as an extension of paper money, backed by the state. One of the points already defined by the BC is that financial institutions will be allowed to issue tokens (digital representation of an asset) of their deposits.

BC’s idea is to design a system in which it is possible to add other services from a starting point, such as “Lego pieces”. For the digital real to come into operation, it will be necessary to create a new layer in the payment system infrastructure. It is precisely this system that will be put to the test in the pilot test phase.

Campos Neto also spoke about the internationalization of Pix. According to him, some countries in Latin America have already contacted the Central Bank to discuss the adoption of Pix. “Because we think you have to make a block, a block in Latin America, for you to have a country that makes a Pix and pays automatically. You solve the problem of cross-border means of payment”, he said.

“We are working with Uruguay, Colombia, Peru and Ecuador. Chile also sought us out to discuss,” he said. “I think it’s a way of unifying the block without needing to talk in terms of currency. If we have an instant payment that is already unified, you are already doing cross-border payment work.”

UNDERSTAND BRAZILIAN DIGITAL CURRENCY

What is the digital real?
It is a CBDC (Central Bank Digital Currency), i.e. a digital currency issued by the Central Bank. It is an extension of paper money, secured and managed by the State.

What are the differences between the digital real and cryptocurrencies and stablecoins?
The digital real is the electronic expression of the Brazilian sovereign currency, while cryptocurrencies and stablecoins are privately issued and, in general, do not have regulation. Cryptocurrencies such as bitcoin and ethereum are highly volatile. Stablecoins, on the other hand, seek to correct this problem by pegging their value, in general, to a sovereign currency.

What is the difference between a retail and wholesale digital currency?
A wholesale digital currency is aimed at high value transactions, involving banks, cooperatives, payment institutions and eventually large companies. A retail digital currency, on the other hand, seeks to meet the needs of individuals and companies of all sizes, and can be used for payments and for everyday financial operations in any range of values.

Can the digital real be converted into banknotes?
It can be converted into any other form of payment currently available in Brazil, such as a conventional bank deposit or physical currency, in addition to being used for day-to-day payments.

What are the next steps for the development of the digital real?
The pilot phase will last 18 months, starting at the end of the first half of this year. The date should be announced on April 25th. The expectation is to have the first digital reais issued at the end of 2024. The schedule may change.