The central bank of Brazil aimed to begin the retail CBDC pilot program by next year.
The central bank digital currency (CBDCs) is a next-generation concept of digital payments, aimed to solve the technical issues associated with the traditional digital payment system. At the present time, more than 110 Central Banks are working on CBDC. 11 countries have fully launched their CBDC and in this race China is at the top.
Recently Fabio Araujo, the coordinator of the CBDC project at the Brazilian central bank, said that the expected high-level use of CBDC will come to light in 2024, just after the end of the pilot phase.
Under the retail CBDC pilot phase, the central bank will test the ability of CBDC for almost every purpose like buying and selling federal bonds and subsequent evaluation. The CBDC payment will work on behalf of the funds in the citizen’s bank account. In short, CBDC will play as a medium to transfer funds but will not hold funds in the ledger wallet.
The central bank executive said:
“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.”
According to Araujo, CBDC will unlock several features for the business & fintech companies to explore multiple uses of digital payment in multiple services and also will bring better efficiency to the payment system.
Further, he said that the CBDC-based payment system will not bring any threat to the existing digital payment systems because the country is already happy with its existing payment system Pix.
Recently some Central banks said that they are facing many challenges, including technical challenges, ahead of the CBDC development plan. The majority of the Fintech & blockchain companies getting significant traction from the Central banks to develop CBDC.
Around a week ago, San Francisco headquartered fintech company Ripple confirmed that more than 20 Central banks are approaching Ripple to get guidance on CBDC development.
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Brazilian CBDC may enter in public use case focussed testing phase by 2024