Brazil to tokenize its currency with the launch of a CBDC

The Brazilian Central Bank is planning to launch a Central Bank Digital Currency (CBDC) in 2024, in an effort to increase financial inclusion and position the country as a leader in the use of blockchain technology in the financial sector.

Over 30 million Brazilian citizens currently do not have access to traditional banking services, such as bank accounts or credit/debit cards. This has been a long-standing issue in Brazil, where the banking industry has been historically concentrated due to the country's macroeconomic volatility, legacy technology, and stringent oversight.

In recent years, however, regulators have fostered competition in the financial sector through new legislation and a more stable macroeconomic environment. This has led to the development of several key initiatives, such as PIX, an instant payments infrastructure that has been highly successful, and the Open Finance program, which allows for the exchange of customer data between financial institutions, promoting greater competition and customer choice.

The Brazilian Central Bank has also endorsed the use of cryptocurrencies and blockchain technology, and has plans to tokenize the Brazilian currency. A CBDC would be a natural extension of these efforts, and could provide a range of benefits, including reduced costs of retail payments (which currently represent 0.5-0.9% of the country's GDP) and increased financial inclusion.

The Brazilian CBDC is expected to be fully implemented in 2024, and could enable a range of use cases, including credit, KYC/AML, tokenization of assets, and programmable money. The success of the CBDC will depend on collaboration between the public and private sectors, but it has the potential to position Brazil as a regional economic leader in South America and provide a model for other countries in Latin America and beyond.

The launch of the CBDC is part of a broader trend of financial innovation and increased competition in Brazil's financial sector. With the PIX and Open Finance initiatives already proving successful, the CBDC could build on this progress and further advance Brazil's financial sector. Ultimately, a successful CBDC could unlock access to financial products for a greater proportion of the Brazilian population, contributing to greater financial inclusion and economic growth.