In a recent development, the largest crypto exchange and digital asset platform in Latin America, Mercado Bitcoin, has partnered up with the Stellar Development Foundation (SDF) to actively pursue the creation of a Brazilian Central Bank Digital Currency (CBDC). A CBDC is a state-backed digital currency. These CBDCs are backed by the country’s own fiat currency.
Cryptocurrencies are gaining more consumer traction with every passing day. Users from developing countries, like Brazil are actively adopting the use of cryptocurrencies and other such digital assets. Therefore, firms and organizations in Brazil are moving to explore new opportunities in the sector. Nonetheless, Latin America is among the most crypto-friendly regions in the world. Its obsession with crypto is understandable because several developing economies eye it as a potential boost for their economies.
Brazilian Mercado Bitcoin and the Stellar Foundation to work on a LIFT project
As per the official announcement made by the Stellar Foundation, both Mercado Bitcoin and Stellar will work on one of the nine projects that were chosen for the LIFT Challenge Real Digital. The Laboratory of Financial and Technological Innovations of Brazil (LIFT) developed minimum viable products (MVP) for a CBDC that complies with the standards of the Brazilian Government.
The Central Bank of Brazil has set prescribed criteria for the establishment of a CBDC. This project was set to come up with the best possible product with minimal effort or complications. Moreover, the project was backed by the Brazilian Central Bank (Bacern), and the National Federation of Associations of Central Bank Servers (Fenasbac). Also, these projects were aimed at focusing on the use cases offered by the Brazilian CBDC.
Therefore, Mercado Bitcoin and the Stellar Foundation aim to meet the expectations of the Brazilian Government and the Central Bank. The Chief Executive Officer of Mercado Bitcoin, Reinaldo Rabelo, said that the exchange will utilize the blockchain technology of Stellar to come up with more effective and efficient crypto solutions. They expect that it would be sufficient to meet the criteria of the Brazilian state, and then achieve approval for Brazil’s CBDC.
Additionally, the CEO of Stellar Foundation, Denelle Dixon, has said that the network is ready to try and test the use cases for the Brazilian CBDC. The protocol believes that this new partnership has the capacity of changing the way Brazilian money works. Also, Mercado Bitcoin will become the face of this change in the country.
Development of new fintech companies through the CBDC
It is evident that Brazil is hoping to pave the way for the development of financial and technological brands in the country. The proposed CBDC will have to help the country in achieving this goal. However, Mercado Bitcoin will face competition from the likes of Visa, Aave, and Microsoft in establishing itself in the finance industry.
Governor of the Brazilian Central Bank, Roberto Campos Neto, believes that the CBDC could come into action in the second half of 2022. But it will be launched as a pilot version initially to test it before the public launch. He further added that the CBDC will be priced according to the Reserves Transfer System. Consequently, banking institutions could issue stablecoin on deposits through smart contacts and DeFi solutions. This will mark a new era in the use of digital currencies in Brazil.
Brazil has been pursuing the use of digital currencies for more than a couple of years now. The country has repeatedly tried to make changes in its financial setup. The issuance of a CBDC could be a perfect addition to the Brazilian economic structure. Through this development, the country’s economy can capitalize. Earlier this year, the Brazilian Central Bank approved nine partners out of 49 proposals for its Digital Real project. Nonetheless, the second half of 2022 will paint a clearer image of the future and use of Brazilian CBDC.