Brazil has started a pilot program for its Central Bank Digital Currency, or CBDC, becoming the latest country to experiment with the digital version of its national currency.
The move is part of the country’s efforts to modernize its financial system and reduce the cost and time associated with traditional financial transactions.
The duration of the development and testing phase is set to end in February 2024, with the evaluation stage following shortly thereafter. During the pilot phase, only a select number of businesses and hours of operation will be allowed to take part.
Brazil Central Bank Aims For Widespread CBDC Adoption
Fabio Araujo, the project coordinator at the Brazilian central bank, told Reuters that testing will involve real-world transactions including the purchase and sale of federal bonds.
Furthermore, the article states that the Brazilian central bank digital currency would be a blockchain-based payment system that facilitates retail transactions.
The customer’s bank account funds will secure this payment. To avoid being rendered obsolete, banks can continue to operate inside the CBDC framework. So, they will be able to keep using the same line of credit.
Image: Tokenist
Delivery versus payment (DvP) of programmable financial assets is the goal of the pilot transactions, which will aim for rapid settlements. Importantly, this will allow CBDC-based transactions between banks to settle instantly with deposit tokens held by end-users.
The bank’s officials are also interested in gauging the privacy of these dealings. During the pilot phase, it will use simulations rather than actual transactions.
Digital Currencies: The Advantage
CBDC has several practical benefits that could revolutionize the way we think about money and financial transactions. First and foremost, CBDCs have the potential to increase financial inclusion, especially for people who lack access to traditional banking services. With digital currencies, anyone with a smartphone and an internet connection can participate in the financial system, allowing for easier and faster transactions.
CBDCs also offer increased security and efficiency in financial transactions. Unlike cash, which can be easily lost or stolen, they are stored digitally and can be traced and monitored for security purposes. Moreover, they can streamline payment processes, reducing the cost and time associated with traditional financial transactions.
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Another potential benefit of CBDCs is their ability to provide greater monetary policy control to central banks. With CBDCs, central banks can more easily regulate the money supply and implement monetary policies, leading to more stable and predictable economic conditions.
Brazil’s central bank says the practical benefits of digital currencies are numerous and varied, and their adoption could lead to a more inclusive, efficient, and secure financial system in the country.
-Featured image from Coincu News
Source: https://bitcoinist.com/cbdc-brazil-goes-digital/