Brazil announces pilot for digital currency seeking to leverage financial services

BRASILIA (Reuters) – Brazil’s central bank announced the start of a digital currency pilot project on Monday, aiming to replicate the success of its instant payment system Pix to popularize financial services in the country.

According to Fabio Araujo, coordinator of the initiative at the bank, the public use of the digital currency should begin at the end of 2024, after the completion of the testing phase – which will include buying and selling of federal public bonds among individuals – and its subsequent evaluation.

Araujo said the “digital real” will be built as a means of payment executed on distributed ledger technology (DLT), to support the provision of retail financial services settled through tokenized deposits in institutions of the financial and payment systems in Brazil.

“This environment reduces costs and brings the possibility of financial inclusion for people. You have services that are very expensive to carry out, such as repo operations, which today are only for banks, but which could be performed by anyone with a technology based on digital currencies,” he said.

“This could reduce the cost of credit, the cost of improving the return on investments. There is a great potential for new service providers, fintechs, democratizing access to the market and offering new services.”

Araujo stressed that the concept of the Brazilian central bank digital currency (CBDC) was not intended to leverage digital payments, as this is already being done on a large scale with Pix, which was launched at the end of 2021 and has been widely adopted in Brazil.

Bank deposits would continue to exist within the Brazilian CBDC, only being registered in a more modern environment, meaning that financial institutions would not lose this source of funds for credit generation.

“Banks are very interested in this new tokenized world, in every conversation we have they have shown a lot of interest,” said Araujo.

(Reporting by Marcela Ayres; Editing by Leslie Adler)