Brazil Moving Toward ‘Tokenization’ of the Economy, Central Bank Chief Says

Bloomberg Línea — In September, some of the final pieces for Brazil’s agenda of financial technological evolution, including real-time payments systems, new platforms for foreign exchange, as well as a digital local currency, will come together in what the central bank’s governor calls the ‘tokenization’ of the economy.

Roberto Campos Neto says that Brazil is moving toward a “tokenized” economy, that is, to extract value from an asset in a digital way.

“We are leaving a world based on accounts to a world based on tokens. We are talking about digital assets and the financial system of the future,” Campos Neto said at an event at the Brazilian Federation of Banks (Febraban) earlier this month.

During a trip to California to research cryptocurrency transfers, Campos Neto says he talked to gamers to find out what they expected from this type of digital platform. The answers were: that it should be secure, fast, cheap, open, transparent, and integrated. And, according to Campos Neto, Pix already fulfills these functions, but he believes that Pix is not the end, but a means.

For the Banco Central do Brasil governor, building the technology lays the road to also finding answers to real-life challenges.

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Campos Neto’s idea is for the central bank to offer a cryptocurrency, the digital real, with a programmable system and integrated custody that allows for the incorporation of decentralized finance (DeFi) protocols.

His goal is to connect all this in a digital wallet format. The sketch he presented of how he imagines this wallet for Brazilians, during the Febraban event, includes the implementation of a system that includes financial services providers and a technological platform to support secure transactions.

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The idea is that Brazilians can see their consolidated credit position in various financial institutions, and perform transactions via Pix or with the digital real.

“We are going to a new interoperable system with a tokenized deposit, data monetization. Our digital currency will be a tokenized deposit,” Campos Neto explained.

The idea is for the central bank’s cryptocurrency to be an extension of the physical real currency, in which banks will transform deposits in stablecoins (currencies pegged to the real), into tokens, which can be converted into CBDC (Central Bank Digital Currency) on demand.

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Called the Lift Challenge, the central bank has instituted a laboratory to aggregate a set of ideas and proposals to formulate the Brazilian cryptocurrency. Itaú bank and Mercado Bitcoin were among those selected to develop projects.

A person familiar with the discussions with the central bank said the staff strike in July had delayed the project’s progress. But according to Campos Neto, the idea is that next year Brazil will already have its digital currency pilot projects in place, and by 2024 the digital real should be up and running.

According to the bank’s schedule, in September it will start the execution of the projects, which will be finalized in February next year.

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