Technology

Brazil's Cenbank publishes guidelines for the development of Brazilian digital currency

Brazilian Central Bank foresees the use of the country's digital currency in retail payments

Photo: REUTERS/Ueslei Marcelino
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  • The Brazilian authority said it is promoting internal discussions with international peers to develop a digital currency;
  • In addition to the predicted use in retail payments, the guidelines address the possibility of developing innovative models from technological developments, such as smart contracts and the internet of things (IoT).

Brazilian Central Bank released on Monday the general guidelines for the potential development of a digital currency in the country, expected to be used in retail payments.

The Brazilian authority said it is promoting internal discussions with international peers to develop a digital currency that favors Brazil‘s participation in economic scenarios in Latin America and globally, increasing efficiency in cross-border transactions.

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A Bank for International Settlements (BIS) survey released last week shows that 86% of central banks are interested in creating their own digital currencies; 60% are already studying or investigating the possibility, and 14% are already testing pilot projects of CBDCs (central bank digital currencies). In 2017, a similar BIS survey showed that only 64% of institutions had some kind of interest in CBDCs.

“Any developments that occur will be consistent with the performance of the Central Bank of Brazil in its mission to ensure the stability of the purchasing power of the currency, ensure a solid, efficient and competitive financial system, and foster the economic well-being of society,” the financial authority said.

In addition to the provision for use in retail payments, the guidelines address the possibility of developing innovative models from technological developments, such as smart contracts, internet of things (IoT), and programmable money, and the ability to perform online and eventually offline operations.

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The idea is that it will be possible to issue the currency by the Central Bank of Brazil, as an extension of physical currency, with distribution to the public intermediated by custodians of the National Financial System and the Brazilian Payment System.

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The guidelines also foresee the absence of remuneration, a guarantee of legal security in its operations, and adherence to all privacy and security principles and rules, among others.

Besides, the guidelines provide a technological design that allows full compliance with international recommendations and legal norms on the prevention of money laundering, the financing of terrorism, and the financing of the proliferation of weapons of mass destruction.

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“The Central Bank believes it is important to deepen the discussion of the subject, including dialogue with the private sector. Before the presentation of an implementation schedule, the dialogue with society will allow a more detailed analysis not only of use cases that can benefit from the issuance of a CBDC but also of the most appropriate technologies for its implementation,” said the Central Bank.

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