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Brazil rallies towards central digital currency

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The central bank of Brazil has announced the beginning of a digital currency pilot project. The central bank hopes that a digital currency will be as successful as its instant payments system Pix.

Fabio Araujo, the coordinator of the digital currency at the central bank, said a full rollout of the “digital real” should begin in 2024, after the end and evaluation of the trial phase.

The CBDC will be executed through distributed ledger technology (DLT), to support the settlement of financial services through tokenized deposits.

Related: Central Bank Digital Currencies make authoritarianism, censorship, and surveillance easy

“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,” Araujo 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.”

He insisted that the “digital real” is not supposed to leverage digital payments, the central bank is already doing that through Pix, the widely adopted instant payment system that was introduced in 2021.

He added that bank deposits would still exist, albeit in a modern environment. That means that financial institutions would not lose deposits as a source of credit generation.

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

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