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Brazil announces digital currency guidelines

The plans to launch a digital real are part of the central bank's modernization agenda for the country's payments industry.
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Written by Angelica Mari, Contributing Editor on

Brazil's central bank has launched general guidelines for the digitization of its currency, the real.

The announcement on the intentions to create a Central Bank Digital Currency (CBDC) made today (24) is part of the central bank's agenda for the modernization of the Brazilian payments industry, which included the launch of instant payments last November and the ongoing implementation of open banking.

When it comes to implementation timescales, the central bank noted there are further discussions to be had before Brazil's CBDC becomes a reality.

"Before defining the presentation of an implementation schedule, the dialogue with society will allow a more detailed analysis not only of use cases that may benefit from the issuance of a CBDC, but also of the most appropriate technologies for its implementation," the institution said in a statement.

The Brazilian central bank's broad digital currency guidelines follow the launch of a study group last August to analyze the positive impact, as well as the risks involved in having a digital real, such as data protection and cyber security, as well as regulatory issues.

According to the banking authority, the current set of guidelines places emphasis on the possibility of developing new market offerings based on innovations such as smart contracts, internet of things (IoT), and programmable money. The digital real may also be used in retail payments and will enable users to carry out online operations and possibly make payments offline.

As an extension of the physical currency, the distribution of the digital real will be intermediated by custodians of the National Financial System and the Brazilian Payments System, with no remuneration to these institutions.

Moreover, the central bank's framework aims to ensure the legal security of the operations carried out with the digital currency, as well as "adherence to all privacy and security principles," as well as the rules determined by the legislation around banking secrecy and the General Data Protection Regulation.

According to the central bank, the technological design of the digital real should allow for "full compliance with international recommendations and legal norms on prevention of money laundering, financing of terrorism, and financing of the proliferation of weapons of mass destruction," as well as "compliance with court orders to track illicit operations."

The central bank also noted that the digital real should allow for interoperability and integration with a view to enabling cross-border payments. When it comes to cybersecurity, the institution noted resilience and cybersecurity standards equivalent to the arrangements applicable to critical financial market infrastructure.

The guidelines presented today relate to the central bank's current understanding in relation to the topic, and are intended to kickstart the discussions around CBDC at a national level, but this may change, the institution said. "Given the stage and dynamics of discussions and developments on the topic worldwide, the [central bank] may reevaluate its position as the discussions evolve," it added.

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