Digital real: tests in the innovation laboratory begin in the first months of 2022. Photo: Adriano Gadini, Pixabay.

The Central Bank (BC) will make a call, in the coming weeks, for projects that may participate in the tests of the digital real. The objective is to identify which solutions would meet the project’s demand. In addition, BC is talking to Mastercard and Visa and is interested in the latter’s offline payment solutions.

That’s what Fabio Araújo, from BC’s executive secretary said this Tuesday (26) during a public hearing on the digital real in the Chamber of Deputies. According to Araújo, who coordinates the digital real project, the forecast is to start testing at the bank’s innovation laboratory in early 2022. Therefore, it should take place between the end of the first quarter and the beginning of the second. The implementation of the digital real would start in 2-3 years.

The hearing was at the request of the Financial Inspection and Control Commission (CFFC). Responding to a question about the situation of credit cards with the digital real, Araújo said that this “is a slightly deeper issue” than that of banks.

“We have been talking to Visa and Mastercard and see in them an intention to enter this market (from digital currencies of central banks, CBDCs) and provide payment services to use the platforms they have, adopt these new technologies and continue offering services to countries,” added the BC representative.

Digital real would have to include offline operation to be inclusive

Araújo recalled that the Bahamas digital currency runs on Mastercard’s infrastructure. In addition, he recalled that Visa has an innovation laboratory with several CBDC questions under study. “We are very interested in Visa solutions, especially the offline payment solution they presented.” But, he said, there are other solutions that may also be viable. Including international startups.

According to him, offline solutions are not yet mature like online ones. However, experts point out that the digital real will only be inclusive if it allows operations in locations and on devices without internet.

In relation to banks, Araújo stated that they will be able to “provide services based on new technologies that are still available in embryonic form in some environments”. And in which there are even frauds, he said. “We want to create a safe, regulated environment.”

In recent months, the BC has said several times that one of its intentions is to insert decentralized finance (DeFi), which runs on blockchain, into the digital real. Furthermore, they do not operate under regulation.

“Banks will adapt well”

For Araújo, “banks will adapt very well (to the digital real)”. That’s because they are very quick to adopt technologies and make good use of them, he added. The Brazilian Federation of Banks (Febraban) created a working group to discuss the sector’s impact and response to the digital real.

The fact that Brazil starts the digital real pilot in 2022 does not mean that the country is late, said Ara’ujo. He argued that most countries are solving wholesale and retail financial system problems that Brazil has already solved. For example, with Pix.

So, it is now developing technology to go beyond what current payment systems offer. “The next step is a step that no country has yet taken. It’s about having an intelligent payment platform,” he said. The BC looks, for example, at smart contracts, which allow actions such as programmable money.

Keiji Sakai, director in Brazil of R3, who developed the Corda software, for distributed registration, also participated in the public hearing. According to Sakai, the company monitors the testing or implementation of digital currencies by central banks in places such as Canada, Singapore, Thailand, Sweden, France and the European Union (EU).

Another participant was Eduardo Diniz, professor at the School of Business Administration at Fundação Getulio Vargas (FGV-SP).