The Cryptocurrency market has been in a slump for almost a year, however, news of its future potential continues to be revealed. At a Poder360 news site conference on December 12, 2022, information was made public indicating the Brazilian Central Bank will be launching a CBDC by 2024.
This news caught the attention of the world, particularly India which is one of the largest countries. South America is on the brink of being able to accept cryptocurrency transactions through national banks, increasing the amount of users and the number of countries with their own digital currencies.
Brazil and CBDC
At the conference, the Central Bank President Roberto Campos Neto unveiled the digital currency and said they will run a test before allowing it to be used by the public. Additionally, he believes this will allow for a greater level of inclusion in the financial industry.
The bank also stated that the system would offer more inclusion, cost-effectiveness, intermediation and competition with lower barriers to entry as well as efficiency in risk control, data monetization and tokenization of capital goods and contracts. They believe this is the way of the digital economy in Brazil.
Many in the Brazilian Administration worried that the tokenized system could damage the balance sheet of the Central Bank. However, the president assured them that it would not affect the monetary policy of the system, as it is based off existing laws relating to deposits.
Representatives from the IMF made comments about the strategy, saying it was simple to adopt and suggested other central authorities should take a look. On November 30, 2022 the Brazilian Congress passed a bill that would regulate the use of cryptocurrency as a payment method, which could help in the adoption of digital resources.
The law still needs approval from the president and would allow cryptocurrency payments for goods, but not legal tender status. This means financial institutions could soon offer crypto payment services, allowing people to buy and trade goods in a similar manner to credit cards.
Countries with CBDCs
Brazil is not the only country to have its own CBDC. With Brazil joining the list, the Bahamas, Nigeria, Eastern Caribbean, and Jamaica have all issued digital currencies. Technology is being studied by many countries, some of which view it as a safer alternative to cryptocurrencies after the disruption caused by the collapse of FTX.
Brazil has made great strides in the regulation and adoption of cryptocurrency. Most of the banks and brokers offer services in relation to cryptocurrency investments, such as token offerings and custody. The country currently has the highest number of cryptocurrency ETFs in Latin America.
Around 10 million people (or 4.9%) own cryptocurrency in Brazil. With its own CDBC, the number of users is expected to increase in the years to come, having a positive effect on the overall cryptocurrency market sentiment.