CBDC, Central Bank Digital Currency, is an electronic form of a country’s fiat currency. Instead of governments printing physical fiat currencies, they instead issue digital coins backed by a government through their central banks. This trend of countries launching their own digital currencies has been on the rise in recent days perhaps because of a record adoption by citizens all over the world. The US already has its digital coin in place that is managed by the Federal Reserve Bank. This comes as governments are in a race to get ahead of Digital currencies so as to control their stability and their mode of operation. This could be a great achievement on the part of the governments by having a digital currency that is regarded as a legal tender by the issuing central bank and therefore accelerating its adoption and recognition by other central banks. Though this move could lead to a release of more stable digital coins with exchange rates with other CBDCs as is with traditional fiat currencies, it could also spell distrust from the crypto market since the market itself is powered by blockchain whose major goal is to ensure anonymity and removal of a controlling element in the manner in which users conduct business.
Having outlined the quarks around CBDCs, several countries are contemplating dipping their interest into the crypto markets by launching their own CBDs. The latest country is Brazil which has recently launched its own experimental digital currency.
As of March 6th 2023, Brazil’s Central Bank released the digital coin as a pilot project and according to Reuters, the government bank seeks to replicate success in the instant payments system Pix, which is a payments solutions provider.
The bank has also laid out its plan for the currency and expects the digital coin to be in public use towards the end of the year 2024 depending on the adoption it achieves through its testing and evaluation phases.
As more nations are developing their financial sectors with beta roll outs of digital assets and coins, Brazil’s pilot project is set to offer a payment option that is built on a distributed ledger that will support provision of financial services through tokens deposited in financial institutions and systems within Brazil.
Fabio Araujo, the coordinator of the project notes that this digital coin could reduce transaction costs within Brazil while ensuring financial inclusivity for all its citizens.
In this process, the government of Brazil plans to reduce the cost of credit within its borders by using this digital coin to bring democracy in access to markets and new services as well as create great potential for fintechs and service providers.
Stay tuned, a lot is in the kitchen, cooking, and we will be ready to serve it hot when it is ready.
