BCB Issues Digital Currency Guidance and Update on Regulatory Sandbox
BCB announced that it received 52 projects in the first cycle of the regulatory sandbox. The Strategic Committee for the Management of the Regulatory Sandbox (CESB) is analyzing the projects and BCB expects to choose 10 projects in the first cycle; the results are expected to be released on September 23, 2021. Additionally, BCB released general guidelines for the Brazilian Central Bank Digital Currency or CBDC.
BCB has been promoting discussions, internally and internationally, for the possible development of a central bank digital currency that may keep up with the dynamic technological evolution of the Brazilian economy, enhance the efficiency of the retail payment system, foster new business models and other innovations based on technological advances, and favor participation of Brazil in regional and global economic scenarios, thus increasing efficiency in cross-border transactions. Post a preliminary assessment and discussions within the working group on CBDC, BCB has set out the guidelines for the potential development of a Brazilian digital currency, which are divided into three categories: functioning, legal guarantees, and technological premises.
The guidelines stipulate that, before the digital currency can be issued, the legal framework must be adjusted to give BCB the necessary powers to operate this new form of currency, thus ensuring the legal security of operations. The extent or nature of these adjustments cannot yet be determined. Compliance with bank secrecy and the General Data Protection Law (LGPD) and other applicable provisions is also a consideration. BCB states that the guarantee of mechanisms to prevent money laundering, terrorist financing, and the financing of the proliferation of weapons of mass destruction is another requirement for a Brazilian CBDC. Having the ability, in the fulfillment of court orders, to track illegal transactions carried out using the digital real is of fundamental importance for BCB. For cross-border payments, it is essential to keep the local system open to the possibility of adopting internationally agreed standards, seeking interoperability solutions with central banks in other countries. Additionally, resilience to cyber-attacks must be compatible with that adopted in the critical infrastructure of the Brazilian financial market.
Related Links (in Portuguese)
- Notification on Regulatory Sandbox
- Press Release on CBDC Guidelines (in English)
- Notification on CBDC Guidelines
Keywords: Americas, Brazil, Banking, Regulatory Sandbox, Fintech, Regtech, CBDC, Digital Currency, Digital Real, BCB
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