On 21 August 2020, Brazil’s central bank announced its intention to set up a world-wide study on the issuance of central bank digital currencies (CBDC). Brazil recognizes the impact a digital Real could have on the country’s financial system, and as such wants to find a balance between using CBDC to improve society’s financial wellbeing, as well as tackling the potential risks which are ‘inherent in this new form of payment.’
Thestudy’s general objective is to look into improving commercialtransactions between private and public entities, nationally andinternationally. Other features of the study include exploring apotential model for aCBDC,itsscope, societal benefits, and national challenges. In terms ofsecurity, the study plans to examine various cybersecurity, dataprotection, and regulatory compliance risks.
Thisis not the first time Brazil’s central bank has demonstratedenthusiasm in the newest technological trends. In April this year, itlaunched PIER,a blockchain platform used to seamlessly exchange data betweenregulatory authorities andfinancial institutions.
ForBrazil in particular, the study will also determine the potentialbenefits of adigital currencyin combinationwith Pix,their new 24/7 instant payment system, which commences operationsthis November. Pix was createdto improve the efficiency and competitiveness of Brazil’s retailpayment market. Brazil is eager to defend Pix and the BrazilianPayment System, having suspendedWhatsApp payment processing in the country two months ago. As withCBDCs, Whatsapp payment processing in Brazil needs to undergo impactanalysis concerning competition, efficiency, data privacy, and localregulatory compliance.
Brazilis not the only country interested in issuing their own CBDCs. Asurvey conducted by the Bank forInternational Settlements (BIS),released in early 2020, showsthat 80% of central banks around the world have started CBDCresearch, 40% of which have begun their own CBDC issuanceexperiments. It seems that central banks around the world havestarted to come to terms with this newest FinTech innovation.
