Brazil’s CBDC Pilot Program To Include VISA And Mastercard

Brazil is poised to join the League of Nations, which has conducted a pilot test of its central bank digital currency (CBDC) with the upcoming event. Accordingly, Banco Central do Brasil, the country’s central bank, will start incorporating participants into its innovative digital real platform from next month.

Global And Local Participants

The Central Bank of Brazil has released the names of the participants in the upcoming CBDC pilot. According to sources familiar with the development, the lists were selected from a pool of 36 bids submitted by individual enterprises and global businesses.

Although 14 participants have been confirmed, it is worth noting that conglomerates of companies jointly submitted a percentage of these bids. If each company had submitted separately, Brazil’s apex bank would have had to deal with nearly 100 proposals.

For emphasis, the US-based tech powerhouse, Microsoft; the Brazilian banking giant Banco Inter; and the cutting-edge digital technology company 7COMm, together form one of the fourteen participants. In addition to Visa and Santander, several Brazilian banking institutions like Itaú Unibanco, Banco Bradesco, and BTG Pactual are some of the notable participants in this CBDC project.

Within the scope of the ongoing digital real pilot phase, the central bank is set to assess its platform’s privacy and programmability capabilities rigorously. This comprehensive evaluation will be conducted through a focused implementation centered around a specific use case: adopting a delivery versus payment protocol designed explicitly for federal public securities.

According to the Central Bank, their platform strategically leverages the potential of blockchain technology and Distributed Ledger Technology to facilitate seamless operations involving tokenized assets. To ensure a controlled and comprehensive approach, the initial phase of the pilot will not entail real-world testing.

Instead, the Central Bank will employ a meticulously designed “simulated environment” that does not involve actual transactions or real values. This approach thoroughly evaluates the platform’s functionalities and capabilities in a controlled setting before progressing to real-world implementation.

Leveraging Traditional Financial Services

The CBDC pilot was officially announced in 2022, marking a significant milestone in the nation’s digital currency journey. Moreover, this virtual currency will be pegged to the county’s national fiat, the real, to ensure stability and value.

With a predetermined supply, the digital real would be progressively minted over time, fostering a controlled and sustainable expansion of the digital currency ecosystem. Home to a population of 214 million individuals, Latin America’s largest country continues to attract global crypto companies as they consider this region a promising market.

In a remarkable collaboration, Binance and Mastercard joined forces in January 2023 to introduce a groundbreaking prepaid crypto card exclusively tailored for the country, solidifying its status as a hotbed for innovative financial solutions. According to reports, the digital real aims to replicate the success of the country’s instant payment platform, Pix, to ensure broader financial inclusion.

Meanwhile, Fabio Araujo, the project coordinator at the central bank, disclosed the anticipated timeline for the public adoption of the digital currency points towards the latter part of 2024. This projection depends on the successful completion of the comprehensive testing phase, which involves critical activities such as the facilitation of buying and selling federal public bonds among individuals.

Once completed, the bank will announce a timeline for the widespread use of the digital asset, he added. As explained by Araujo, the “digital real” is envisioned as a cutting-edge payment solution built upon the foundation of distributed ledger technology (DLT).

Its primary objective is to boost the seamless provision of retail financial services, facilitating transactions settled through tokenized deposits within Brazil’s esteemed financial and payment systems. The coordinator hints at the role of Pix in leveraging digital payments and that bank deposits will continue to exist in the country’s CBDC platform but in a more innovative financial environment.

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