The Central Bank of Brazil launched, on March 6 of this year, the pilot project of Real Digital, a sovereign currency, exclusively digital, and issued by the Central Bank of Brazil itself. Digital currencies issued by central banks have usually been called by the name of Central Bank Digital Currencies (CBDC).
One of the objectives of the pilot project, called Project RD, is to test the proposed technologies for the issuance and circulation of the digital currency and to evaluate the impacts and benefits of the creation of the Brazilian CBDC within a controlled environment. The Project RD aims more broadly to impact the end user of the financial system, although the Real Digital is an interbank wholesale product, comparable to bank reserves or settlement accounts, and will not, at least initially, circulate to the retail public.
The RD Project will adopt a model according to which the Central Bank of Brazil will issue the Real Digital, which will basically fulfill, at a preliminary stage, the function of settlement mechanism for digital assets, and these assets will be accessible to retail, issued by financial and payment institutions. Such digital assets will correspond to tokenized versions of bank deposits and balances in payment accounts, analogous to stablecoins, but inserted into a regulatory framework.
This model assumes that it is important to maintain financial intermediation and the leverage and credit generation capacity of the banking system.
A platform based on Distributed Ledger Technology (DLT) will be used in the pilot project that will simulate transactions of issuance, trading, transfer and redemption of predetermined assets. Initially, such assets will be central bank currencies, bank deposits, electronic currencies and federal government bonds. However, there may be an expansion of the assets involved in the test in the future, with preference for financial assets and securities.
The infrastructure will not allow overdraft balances, and the project will not be taken to the production environment, being restricted to simulated transactions. Participation in the project will be limited to a certain number of financial institutions and payment institutions. Other limitations may be imposed to allow for timely implementation of the project.
The RD Project involves the search for solutions to preserve information security and privacy, in order to ensure compliance with the legal requirements applicable to the Brazilian National Financial System.
It is discussed that, for the wide-ranging implementation of Real Digital, it would be necessary to amend the legislation to expand the competence of the Central Bank of Brazil for the issuance of currency in exclusively digital format. Currently, the competence of the Central Bank of Brazil for this purpose is restricted to the issuance of only certain currency formats, under the conditions and limits authorized by the Brazilian National Monetary Council, as provided for in article 10 of Law 4,595/64, accepted by the Federal Constitution as a complementary law.
It is being analyzed in the National Congress the Complementary Law Project 9/22, which proposes to regulate the issuance of the national currency in digital format. This bill includes a ban on the Central Bank of Brazil directly offering credit, banking, payment or financial investment products and services to the consumer, in order to safeguard financial intermediation.
