Brazil's digital currency could help companies monetize data and foster financial inclusion, Banco Central do Brasil President Roberto Campos Neto said during a panel discussion today.
Without providing specifics, Campos Neto argued that a central bank digital currency, or CBDC, could help fintechs and other companies in Brazil to monetize financial data.
"A lot of companies are building digital wallets, but have not found the way yet to monetize data," he said during the Bank for International Settlements Innovation Summit. The central bank recently selected nine projects in its bid to design the so-called digital real, and a prototype is expected within four months.
The innovation comes as cryptocurrency adoption grows across Latin America in the search for better investments and safe havens from volatile currencies. It also comes on the heels of Pix, a widely used and groundbreaking low-cost payment system created by the central bank that has been adopted by 70% of Brazil's adult population since going live in late 2020.
Innovating together
Bank for International Settlements Head of Research Hyun Song Shin said that several banks were expressing fear that CBDC would take revenue from the sector.
To Campos Neto, overcoming the trepidation of large financial institutions will be key, and banks and lenders would take part in the process of developing the digital real.
"We want to have a different system where banks will be able to issue stable coins on the deposits or money than they have, and that will be guaranteed by a CBDC," Campos Neto said.
Banks were also apprehensive when Pix was launched, Campos Neto noted. There was initially a "misconception" among lenders who were reluctant to embrace Pix, arguing that they would be losing fee revenue to the new structure.
Banks eventually realized that while losing out on some fees because of Pix, they started making money elsewhere.
Institutions have also benefited from a larger pie, he said, in which smaller-sized merchants that were not necessarily banked before are now opening accounts and taking out loans.
"This is not a zero-sum game but the whole system is going to be larger with new business models and new clients," he added. "What was initially seen as a system that would withdraw revenue from the system is actually adding it."
Data reported by the central bank shows that there are now over 122 million users registered, of which 109 million are individuals. Together, the number makes up roughly 70% of the adult population in Brazil.
According to the Bank of International Settlements, data show that the number of Pix transactions is already as big as that of debit cards or credit cards in Brazil.
Like CBDC, Pix is part of a broader agenda that includes open banking to help drive inclusion as well as a digital currency as of 2024. The Bank of International Settlements noted in a report that the adoption of Pix in Brazil demonstrates how infrastructure set up by central banks can contribute to competition, lower costs and greater inclusion.
"These features have relevance for the possible adoption of central bank digital currencies," the report stated. The BIS noted that both CBDC and systems like Pix rely on some similar features such as digital identification, APIs and cryptography.
