Brazil’s central bank, Banco Central do Brasil (BCB), is pushing for more time to roll out a central bank digital currency (CBDC).
Accordingly, the implementation of central bank digital currency (CBDC) will last until 2024.
Brazil Delays Deployment of Central Bank Digital Currency (CBDC)
In early May, the BCB released a document covering the general principles and characteristics of Brazil’s future CBDCs. Roberto Campos Neto, the central banker of the BCB, also stated at the beginning of last year that the country will probably be prepared and ready for a digital Real in 2022.
But the central bank is currently delaying the project citing financial infrastructure and uncertain international circumstances.
BCB recently launched a new payment system called PIX, created to address the growing digitization of the Brazilian economy and the lack of available payment methods. The central bank is also expected to launch its open banking model in the near future to support Brazil’s financial systems.
“Brazilian CBDC implants could provide new tools to drive innovation and competition in an increasingly digital economy; reduce the use of cash and thus maintenance costs; improve cross-border payment processes; curb illegal activities and improve financial inclusion. “
But in order to make a CBDC viable, BCB’s current projects must become a huge success. In a study conducted by the Institutio Locomotiva in 2019, 45 million Brazilians – a third of the Brazilian population – did not have access to a bank account. Given the current vulnerabilities in Brazil’s financial system, the implementation of a digital real is likely to have little or no effect.
The BCB also announced that it is meeting with other central banks to discuss global standards for CBDCs and the potential impacts a digital currency could have on local economies. and international trade, among others.
“After establishing common directives on desirable features of the digital reality, an open discussion with stakeholders will uncover use cases and enhance our understanding of the potential. potential of CBDC in the specific case of the Brazilian economy.”
Central Bank of Brazil publishes its CBDC guidelines
The announcement of the intention to create a Central Bank Digital Currency (CBDC) was made on May 24 as part of the central bank’s agenda to modernize the payments industry. Brazil, including the launch of instant payments last November and the continuous rollout of opening banks.
When it comes to the implementation timeframe, the central bank noted that further discussions are needed before the Brazilian CBDC becomes a reality.
“Before determining the presentation of an implementation schedule, a dialogue with society will allow for a more detailed analysis not only of the use cases that could benefit from the issuance of a CBDC, but also of the most appropriate technologies to implement it,” the organization said in a statement.
Brazil’s central bank’s broad digital currency guidelines follow the launch of a research team last August to analyze the positive impact, as well as the risks associated with its use. digital currency, such as data protection and cybersecurity, as well as regulatory issues.
According to the banking regulator, the May guidelines emphasized the possibility of developing new market services based on innovations such as smart contracts, internet of things (IoT) and programmable money. . Digital currency can also be used in retail payments and will allow users to carry out online activities and be able to do digital currency which will be custodians of the National Financial System and the Brazilian Payment System as intermediaries, with no remuneration for these institutions.
Furthermore, the central bank’s framework aims to ensure the legal safety of operations conducted with digital currencies, as well as “compliance with all principles of privacy and security,” as well as the rules defined by laws relating to banking secrecy and the Data Protection Regulation.
According to the central bank, the technological design of digital currencies must allow “full compliance with international legal recommendations and regulations on the prevention of money laundering, the financing of terrorism, and the financing of dissemination.” transform weapons of mass destruction,” as well as “complying with court orders to monitor illegal activities.”
The central bank also noted that digital currencies should allow interoperability and integration to enable cross-border payments. When it comes to cybersecurity, the organization noted standards of resilience and cybersecurity are equivalent to those applicable to critical financial market infrastructure.
However, the Brazilian Central Bank’s digital currency implementation plan is said to be delayed until 2024 due to the current financial infrastructure and uncertain international context.
Although the implementation of CBDC has a lot of potential for the economy, given the vulnerabilities in the current financial system, this is very unlikely.
Therefore, in order for the plan to succeed, BDC’s current projects must also be successful.
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