Digitalization has played a key role in the development and advancement of several areas, and the financial sector is no exception. In recent years, we have witnessed rapid growth in the digitization of financial services, from online banking to cryptocurrencies.
The Central Bank Digital Currency (CBDC) issue has caught the attention of several central banks. A significant part of them, representing almost the entirety of the world’s GDP, are studying, exploring or testing designs, operational and technological aspects of a CBDC system.
CBDCs can improve the efficiency of the retail payments market and promote competition and financial inclusion for the population with little or no access to banking services. The crisis of the pandemic has shown the importance of digital means of payments reaching the most vulnerable population.
According to the Central Bank of Brazil, the Central Bank has been following the issue for a few years and, in August 2020, organized a working group to study the issuance of a Brazilian digital currency, the Digital Real.
The digital Real is a digital representation of Brazil’s official currency, the Real, which is being developed to facilitate faster and safer transactions in the digital realm. One of the main motivations behind the development of the digital real is to increase financial inclusion. In a country like Brazil, where a significant portion of the population remains unbanked, this advance can be a game changer. With a digital currency, individuals without access to traditional banking services can participate in the digital economy, opening up new opportunities for economic growth and development.
The benefits of a digitized real: In addition to promoting financial inclusion, Real Digital will offer several other benefits that make it an interesting concept:
1. Increased speed and efficiency: Traditional bank transfers can take time, often requiring multiple intermediaries. With a digital Real, transactions can be processed almost instantly, eliminating the need for long waiting periods, and allowing transactions with amounts that would not be met by the PIX.
2. Enhanced security: The use of blockchain technology, a secure and transparent digital ledger, ensures that transactions made with the digital Real are tamper-proof and fraud-resistant.
3. Economic transactions: With digital transactions in reais, the need for physical cash is minimized, reducing the costs associated with printing, distributing and storing physical currency.
4. Streamlined cross-border transactions: Digital currency can eliminate the complexities and high costs typically associated with international transfers, simplifying cross-border transactions for businesses and individuals.
While the concept of a digital real looks promising, there are still some challenges that need to be addressed before widespread adoption becomes a reality. These challenges include regulatory concerns, security risks, and the need for robust infrastructure to support the digital currency ecosystem. However, with careful planning and collaboration between financial institutions and regulators, these obstacles can be overcome.
Digital Real represents an exciting breakthrough in the world of digital finance. While it may not be an essential development for everyone, its potential to improve financial inclusion, streamline transactions, and improve security is undoubtedly intriguing. As the digital landscape continues to evolve, it is essential to stay informed about these advancements and be ready to embrace the future of digital finance. So whether you’re a tech-savvy finance aficionado or just a curious individual, keep an eye out for the digital real – it could be the next big innovation.
If you want to be prepared for this innovation, count on Topaz’s Full Banking Platform: in addition to having the leading anti-fraud solution, we are ISO 9001 and 27001 certified, reinforcing our focus on Information Security. Our Treasury, Messaging and Anti-Money Laundering solutions will provide you with what your institution needs to deliver digital financial transactions securely.
The Topaz Platform will lead your company on this transformative journey and that will bring the evolution that will put your institution on a new level of innovation.