A new phase of money: Real Digital enters the test and promises a revolution in commercial relations | report

In light of the evolution of payments, it is coming Real digital. The Central Bank (BC) has started testing and the new capabilities should be implemented in 2024. At the outset, it is worth noting that this is not a cryptocurrency, but a digital currency issued and regulated by the BC.

In practice, this is why Real Digital needs a digital wallet that will be used exclusively for online operations. Unlike cryptocurrency, Real Digital has the same fundamentals (but also problems) as traditional fiat currency.

With this initiative, the Brazilian central bank is ahead of other international monetary authorities with the start of official tests to implement the tool.

The central bank’s future digital currency (CBDC) project execution laboratory started last week (5/9) at the Lift Challenge – Real Digital. This process is a partnership between BC and the National Federation of Central Bank Server Associations (Fenasbac) and aims to identify the fundamental infrastructure characteristics for a Brazilian CBDC.

The idea is that after 4 months, controlled tests with limited values, groups and regions will start in the laboratory. BC is expected to implement several pilot projects in 2023.

It will be a process of “tokenization” of financial assets. The idea is for banks to provide a digital representation of assets to offer customers the ability to use digital currencies without having to exchange funds held in the bank for CBDC, which is a direct obligation of the monetary authorities. Translation: Digital money is one thing, physical money is another. But the two are currency and have the same value.

According to Fintechs (Harvard) and Blockchain (MIT) expert and CEO of the fintech consortium Mycon, Márcio Kogut, the BC initiative reduces the cost of money. Simplifies: the simplest comparison is now will be digitization from money.

If before this process took place with the involvement of intermediaries, as in the case of credit or debit cards, now we have a direct option. “On the timeline, first came the physical money, then came the credit card, which works through a bank, which holds my money, and the card company, which charges a fee for using the money digitally. Real Digital cuts costs by taking out middlemen.”

Márcio also highlights Real Digital as a factor of advancement for the Brazilian system, which also includes Pix and Open Banking. He still expects the launch of new solutions, reducing the costs of ticketing companies, for example. “The tests will allow the elimination of costs from company to company. Just like Pix did with transfers between individuals.”

power of digital currencies in people’s everyday life it is already relevant because online shopping has become a part of everyday life. An estimate by Baynard, an international research institute for UX (user experience – mainly focused on e-commerce), points out that almost 70% of online shopping carts are abandoned in Check it out on platforms that do not have payment systems including digital wallets.

In the case of e-commerce that has them, the sales conversion rate is three times higher. This is because – and this also applies to purchases in physical stores – in addition to the fact that the customer cannot pay at that moment, he may give up trying again because of the bad experience he had.

A specialist in the digital transformation of means of payment, MBA professor at the Fundação Getulio Vargas (FGV), Roberto Kanter, points out that other countries, such as France, China, Japan, Russia, the USA and England, are testing digital currencies.

Other more advanced experiences, such as Petro from Venezuela, which, however, is backed by oil reserves.

Kanter points to the security of the Brazilian initiative as a differentiator, which should allow transactions involving, for example, imports and exports to be carried out digitally and more cheaply than now. “The fact that Real Digital uses technology blockchain making it an almost impenetrable guarantee.”

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POSTPONE

Originally, the digital reality lab was supposed to start at the end of March and end at the end of July, but BC decided to interrupt the schedule due to a server strike that started in April and lasted for three months.

VARIETY OF PROJECTS

43 proposals were submitted to LIFT, not only from Brazil, but also from seven other countries (Germany, United States, Israel, Mexico, Portugal, United Kingdom and Sweden), nine were selected for monitoring.

POSSIBILITIES PRESENTED

Application projects are the most diverse: delivery versus payment (DvP), payment versus payment (PvP) applications, Internet of Things (IoT), decentralized finance (DeFi) and payment solutions when both the payer and the recipient are without internet access (dual offline).

QUESTIONS AND ANSWERS

What distinguishes Real Digital from cryptocurrencies?

The difference between cryptocurrencies is that they are all decentralized, without the control of any monetary entity, which allows them to be used for a variety of purposes – including illicit ones.

What guarantees the security of Real Digital?

The digital security of the currency takes place through a public blockchain network that will prevent the decentralization of transactions, ensuring the control of the monetary authority over the circulation and use of Real Digital.

Can Real Digital be converted into banknotes?

The use of Real Digital will be transparent and can be converted into any other form of payment available today – such as a conventional bank deposit or physical real – and can also be used for everyday payments.

What is the difference between Real Digital and reals deposited in the bank accounts of citizens, which do not physically exist?

There are some important differences between these two currencies. The first is that reals currently deposited in citizens’ bank checking accounts are the responsibility of the bank that received the deposit, while digital reals will be the direct responsibility of BC. The main difference, however, is that BC wants to implement forward-thinking payment innovations, such as the incorporation of smart contracts and other technologies, Real digital can be a native tool for transaction settlement, allowing for greater flexibility, better customization of products to consumer needs, and much more. lower mediation costs.

Can Real Digital be “mined”?

Any person or company wishing to have reals in digital format will supply reals in conventional format and BC will issue the corresponding digital reals. This operation will not be carried out directly with the BC, it will be mediated by a participant in the financial system – a bank, cooperative or fintech – or in the payment system – a payment institution – or even a new type of company that will be created under the authority of the BC for mediating the access and use of reality in digital format.