The digitization of money continues in full swing around the world. Part of this process takes place through the CBDC, or Central Bank Digital Currency. It is the digital version of an official currency, backed by the Central Bank of the country in question.
The concept is an appropriation of what happens in the cryptocurrency universe. Only in part, however: here there is no decentralization characteristic of the crypto universe, it is the State that issues the money, as already happens with traditional currencies.
Today, the country with the most advanced CBDC is China, where research on this technology began in 2014. Over there, you can already use the digital yuan to make day-to-day payments, and even salaries can be paid that way. By October 2022, around 100 billion yuan had already been transacted in its digital format.
Now, it is Brazil that starts testing with the national CBDC. However, our Central Bank took a different path from the Chinese model. Here the tests will not initially involve retail payments. For the time being, you will not be able to pay for your purchases with Real Digital.
The reason for this is that Brazil has something that China does not: Pix.
Leaving the context of everyday life
In an interview with Tecnocast 286, professor Carlos Ragazzo, from FGV, reminds us of the particularities of the Chinese case. Over there, the population is already more than used to the digitization of payments. Just look at the widespread use of super apps WeChat and AliPay.
By concentrating so much of the transactions made in the country, these applications – solutions private, offered by Tencent and Alibaba – accumulate a lot of power over the local financial system. For the Chinese government, encouraging the use of the digital yuan – that is, the solution from the government – is also a way of balancing that relationship, so to speak.
There, their project is to reduce dependence on major platforms, AliPay and WeChat. Because they already got rid of the cash. It’s already ninety something percent digital payments. But these digital payments take place outside traditional financial systems, traditional Chinese commercial banks. (…) The digital yuan was kind of used to start reducing the relevance of these supergiant Chinese digital platforms over there.
Brazil has nothing like WeChat or AliPay. Even WhatsApp Pay finds it difficult to take off in the Brazilian context. Around here, the most used solution is already the one that came from the government: Pix, whose structure has proven to be sufficient for retail payments, those we make every day.
It is for this reason that Real Digital does not come with this focus, as it did in China. Therefore, the Brazilian CBDC pilot opens the door for financial institutions to present projects for new products and services that can be made possible by Real Digital.
Smart contracts and programmability
The benefits of a CBDC go a lot along the lines of facilitating certain operations. From sending remittances from one country to another to transactions between financial institutions, which involve large sums of money. Real Digital is likely to have applications on these fronts.
However, it can also be useful for speeding up some types of transactions. Ragazzo quotes a project led by Santander to transfer vehicles. In it, the car becomes a token within a marketplace. The transmission of the good to the buyer would be immediate, taking place right after payment with Real Digital and dispensing with the bureaucracy normally associated with this type of business.
The CBDC here is allied to another technology, the smart contracts (smart contracts), protocols that allow the automatic execution of transactions from the definition of certain conditions. All this through blockchain, where the contract clauses are recorded.
It is an interesting possibility, with practical implications for the public’s life. Here Real Digital shows its potential beyond day-to-day payments, with which a more immediate association is established.
Another project is a partnership between fintech Capitual and TecBan. Imagine you made an online purchase, and the product was delivered to a smart locker. also from smart contractsthe locker would identify when you picked up your purchase, and only then would the money – like Real Digital – be passed on to the seller.
According to Ragazzo, this application is linked to the idea of the programmability of money, a very important concept in the Real Digital pilot.
As the tests progress, the tendency is that other utilities are found and new services suggested. With the infrastructure being offered by the Central Bank, it is now up to the market to be creative and propose innovative ways of making use of it.
