Brazil announced on Wednesday September 9 the arrival of a state digital currency (CBDC). As for China, which had announced a similar project, Brazil announces an effective launch for 2022. From this year, an instant payment system must come to prepare the ground.
The BRICS countries seem to fear a possible evolution of the currency. Through the blockchain, the various crypto-currencies in vogue today intend to take their power away from states with money and money. With digital, non-centralized tokens, countries would no longer exercise the same role over their citizens and their trade policy with partners. Brazil joins China on this point, for a simple goal: to convert local currency to digital format, to avoid being overtaken by cryptocurrency technologies.
Instant payments system
To be able to convert inhabitants to its digital currency in less than two years, Brazil will have work: 70% of its citizens choose cash as their main means of payment, according to the Locomotiva Institute. But the Brazilian central bank is preparing the ground and announces the release next November of an instant payment system. Named “PIX”, the latter promises to bypass all payment intermediaries (such as card issuers) by using digital wallets and payments via QR codes.
Brazil may face a delay in the use of bank cards and mobile payments, but it has a major weapon: the largest neo-bank in the world, Nubank. Created in 2013, the establishment is far superior to N26, Revolut or Monzo. On June 1, 2020, it exceeded a symbolic milestone: that of 25 million users, out of the country’s 209 million citizens, 110 million active people, and only 50 million who have a bank account. A good indicator for the country, and a real pivotal tool.
In addition to hosting the largest online bank in the world, Brazil is in full swing. The health crisis, which is ravaging the country, has propelled the changes towards digital payments. This will help the country prepare the ground for the arrival of a 100% digital currency, especially in large cities where contactless payments have increased fivefold in the space of a year. This increase is not the most representative; Coming from the Brazilian LABS laboratory, it focuses on the period March 2019 – March 2020. Since then, the increase must be even greater.
Two years to prepare for its CBDC, will it be satisfactory for the country? In fact, it may well be a priority. On the one hand, about financial inclusion. Access to financial tools and services among citizens is still restricted (transactions, payments, savings, credit and insurance) and access to these financial products and services facilitates daily life and helps households and businesses to anticipate the financing of ‘long-term goals or dealing with unforeseen events. A digital currency could be decisive in meeting these needs.
At the same time, the creation of a CBDC, in other words a digital currency centralized by the central bank, is a counterattack to the rise of cryptocurrencies. Like the dollar for countries in Latin America and Central America in crisis, cryptocurrencies like Bitcoin could become a safe haven to avoid a currency depreciation. But for Brazil, this would result in a flight of capital, and a loss of power over the currency, as we recalled at the beginning of the article. It is not for nothing that Brazil and China have unveiled their plans to create a digital currency, and that Russia is the second country in the global ranking of the Global Crypto Adoption Index 2020.