Brazil Launches A CBDC Pilot, Public Release Set For 2024

The Central Bank of Brazil has started testing its central bank digital currency (CBDC) initiative, which aims to encourage greater participation of Brazilians in the financial industry.

The launch of the CBDC Pilot in Brazil

The coordinator of the CBDC project at the Brazilian central bank, Fabio Araujo, commented on Monday that right after the trial phase ends, the widespread adoption of the digital real should happen in 2024. For now, Brazilians purchasing and selling government bonds as well as subsequent evaluation will be a part of the testing phase.

The Brazilian CBDC, according to the report from Brazil’s central bank, would be a blockchain-based payment system that targets retail transactions. Customers’ deposits in their bank accounts would secure the transactions. Banks, on the other hand, would remain in the CBDC matrix and not be excluded.

“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 added.

Araujo also claimed that because Brazil's current payment system – Pix, already serves this purpose, the prospective CBDC effort is not meant to integrate with digital payment rails.

“This could reduce the cost of credit, the cost of improving the return on investments. There is a great potential for new service providers, fintech, democratizing access to the market and offering new services.” Araujo concluded.

What about other countries?

Several nations outside Brazil are also running CBDC pilot programs. In April 2023, the Japanese apex bank plans to start testing its CBDC project. Meanwhile, a total of 50,000 users and 5,000 merchants have already signed up for India's retail digital rupee experiment, which launched in December 2022. However, to ban the creation of a digital currency, Congressman Tom Emmer of the US has filed a measure.

Thailand adds a crypto tax break

Meanwhile, Thai companies creating digital tokens are now exempt from corporate income tax and value-added tax (VAT). Digital token investments will be used as an alternative to currently used conventional ways, such as debentures, for companies to raise funds.

Rachada Dhnadirek, a government spokeswoman, said that the tax advantages might cost the Thai government 35 million baht ($1 billion), despite that over the next two years, the country may witness investment token sales worth 128 billion baht ($3.71 billion).