Key takeaways:
- The Central Bank of Brazil chose 14 institutions to participate in the digital real pilot, the country’s central bank digital currency (CBDC).
- Visa and Microsoft were among the multinational corporations invited to participate.
The Central Bank of Brazil has recently made a significant stride towards exploring the realm of digital currencies by selecting 14 participants for its Central Bank Digital Currency (CBDC) pilot. The pilot program aims to test the feasibility and potential benefits of a digital currency issued and regulated by the country’s central bank.
The list, which was released on Wednesday, includes significant regional financial institutions like Bradesco, Nubank, and Ita Unibanco, as well as Banco do Brasil, the largest publicly traded bank in Brazil, and the regional stock exchange B3. Microsoft and Visa, two multinational corporations, were also selected to take part.
During the initial phase of the CBDC pilot program, the primary emphasis will be on evaluating privacy and programmability features. The program will specifically test the settlement process of government bonds, wherein transactions will involve the simultaneous exchange of physical currency with ownership rights to the bonds or delivery versus payment (DvP) transactions.
The aforementioned phase will involve the purchase, selling, and appraisal of individual federal public bonds.
The ‘Digital Real’ will be developed specifically as a form of payment. Additionally, it will use distributed ledger technology (DLT) to facilitate the delivery of retail financial services settled by tokenized deposits in Brazilian financial institutions.
It’s important to note that Brazil does not currently have any intentions to introduce a retail Central Bank Digital Currency. Therefore, the trials will primarily focus on utilizing the CBDC for interbank transactions. The consumer-facing aspect of the program will employ tokenized representations of bank deposits, allowing for a seamless integration of digital currency within existing banking systems.
Starting in mid-June 2023, the Central Bank of Brazil will start integrating participants into the Real Digital Pilot platform. The bank received an overwhelming response, with over 100 institutions from various financial sectors expressing interest.
In total, they received 36 proposals from a diverse range of entities, including payment institutions, cooperatives, public banks, cryptocurrency companies, financial market infrastructure operators, and payment settlement institutions.
This demonstrates the widespread interest and involvement from different sectors of the financial industry in Brazil’s CBDC pilot program.
Brazil’s Central Bank has been closely monitoring and evaluating the implications of cryptocurrencies within the country’s financial landscape. Back in February, Banco do Brasil permitted Brazilian taxpayers to pay their tax bill using bitcoin due to a collaborative effort with the Brazilian cryptocurrency business Bitfy.
