Good day everyone,
I hope you are all well and having an excellent week, welcome to CryptoGod-1’s blog on all things crypto. A new pilot scheme in Brazil for their Central Bank CBDC is looking for participating firms to take part in the programme, but interesting they have all but officially excluded any crypto firms taking part.
Brazilian Central Bank Pilot Scheme
An initiative by the Brazilian Central Bank for testing a CBDC has effectively blocked crypto firms from taking part. Back on the 3rd of May 2023 the Central Bank posted an application on its website for up to 10 institutions to join the next phase of its pilot scheme. The application process ran between the 2nd of May 2023 and the 12th of May 202, in which any entity interested had to submit their proposal.
While the notice did not officially rule out the participation of companies based in the cryptocurrency industry, the media outlet Livecoins announced that the posting was basically made to snub any players in the crypto space, as they posting required all would-be participants to be registered and regulated finance or fintech providers.
Considering no crypto based firm is currently regulated under Brazilian law, there is a blanket ban on any companies from that space taking part. Even if they wished to, they are automatically ineligible due to the restrictions on the applicants. Livecoins stated:
“Cryptocurrency platforms […] will be left out of the digital real pilot. In practice, the pilot is restricted to banks and a few other regulated institutions. The situation is almost a ‘friends of the king’ scenario.”
The plan from the Central Bank is to introduce its CBDC later in 2023, while they have also claimed the token is designed to help in the development and growth of domestic businesses and start-ups.
The Central Bank also went on to explain in the notice that it was mainly interested in working with firms who had a "deep knowledge of the Ethereum Virtual Machine (EVM)." The EVM is a computation engine for the Ethereum blockchain network which manages the state of the blockchain protocol and realizes smart contracts. The Central Bank also noted how they wished to work with firms that have prior experience with distributed ledger technology (DLT).
The fact that many, if not all, cryptocurrency based companies would have a certain level of exposure and experience with one if not both of these requirements makes it even more baffling that they are not included in the scheme.
In terms of cryptocurrency adoption and growth, while it is good to see governments taking an interest in crypto, there are still many doubts and fears over a government led and controlled digital currency. Brazil is the nation with the third highest rate of adoption and growth in terms of cryptocurrency on a year-on-year basis, according to data from the fourth quarter of 2022.
Mixed news for Brazil most certainly, with the exclusion of companies based in the crypto space certainly raising a couple of eyebrows. While it is good to see companies and business adopt crypto, whether or not a CBDC is the solution remains to be seen. However, by ensuring those in the crypto space are excluded, it further highlights the distinct separation between state and crypto.
Have a great day.
Peace. CryptoGod-1.
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