The Central Bank of Brazil (BCB) updated the Real Digital guidelines, announced the start of Real Digital Pilot Project “Pilot RD,” and published a resolution on technical requirements and operational procedures for the implementation of the Open Finance System in Brazil. Additionally, the National Monetary Council (CMN) approved regulations on the organization and functioning of service confederations constituted by central credit cooperatives and published a resolution on the organization and operation of commercial banks and multiple banks (with effective date of March 01, 2023).
BCB updated the Real Digital guidelines, published in May 2021, to direct the evolution of the Real Digital initiative and guide discussions with domestic and foreign regulators, international organizations, industry and academia. The updated Real Digital guidelines seek to design a more open financial system, which can bring new services and technologies to a broader portion of the population, in order to promote a higher level of financial inclusion, through the democratic availability of investment tools, credit and insurance, among others. Following are the salient points in the updated Real Digital guidelines:
- Emphasis on the development of innovative models with the incorporation of technologies, such as smart contracts and programmable money, compatible with the settlement of operations through the “internet of things” (IoT).
- Focus on the development of online applications, keeping in mind the possibility of offline payments.
- Issuance of the Real Digital by the BCB, as a means of payment, in order to support the offer of retail financial services settled through deposit tokens in participants of the National Financial System (SFN) and the Brazilian Payments System (SPB).
- Application of the current regulatory framework to operations carried out on the Real Digital platform, avoiding regulatory asymmetries.
- Ensuring legal certainty in transactions carried out on the Real Digital platform.
- Compliance with all privacy and security principles and rules provided for in Brazilian legislation, in particular in Complementary Law No. 105, of January 10, 2001 (banking secrecy), and Law No. 13,709, of August 14, 2018 (General Law Protection of Personal Data).
- Technological design that allows full compliance with international recommendations and legal rules on the prevention of money laundering, the financing of terrorism and the financing of the proliferation of weapons of mass destruction, including compliance with court orders for tracking illicit operations.
- Adoption of a technological solution based on DLT that allows registration of assets of different natures, decentralization in the provision of products and services, interoperability with legacy domestic systems and with other systems for registering and transferring information and trading regulated digital assets, and integration with systems in other jurisdictions, with a view to making cross-border payments.
- Adoption of resiliency and cybersecurity standards equivalent to those applicable to critical infrastructures in the financial market.
In addition, BCB announced that it will start testing a platform for operations with Real Digital, the "Pilot RD", in line with the newly updated guidelines by March 2023. By conducting the RD Pilot, BCB will evaluate the programmability gains allowed by a Distributed Ledger Technology (DLT) platform through operations with "tokenized" assets. Among the assets selected for the RD Pilot are "tokenized deposits," which are digital representations of deposits held by financial institutions or payment institutions. These deposits will follow their respective regulatory regimes for accessing and transmitting information during the tests and will be used to settle transactions with "tokenized" Federal Public Bonds issued on the platform. BCB will also create a forum for the exchange of information and adequate orientation of the expectations in relation to the development of this platform and the proposed tests. BCB also published a Resolution No. 294, which amends BCB Resolution No. 32 and establishes the technical requirements and operational procedures for the implementation of the Open Finance System in Brazil. Under this Resolution, BCB will provide Manuals on Open Finance Scope of Data and Services, Open Finance API, Open Finance Governance, Open Finance Security, and Open Finance Customer Experience. This Resolution enters into force on April 01, 2023.
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Keywords: Americas, Brazil, Banking, Regtech, Distributed Ledger Technology, Open Finance, Digital Assets, Real Digital Pilot, Credit Risk, Basel, Regulatory Capital, API, Governance, BCB
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