Brazil central bank director terms Bitcoin a financial innovation

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Fabio Arau­jo, the direc­tor of the Cen­tral Bank of Brazil, has praised Bitcoin’s (BTC) tech­no­log­i­cal prop­er­ties terming the asset as a finan­cial inno­va­tion that has giv­en rise to new crit­i­cal products. 

For instance, Arau­jo sin­gled out Bitcoin’s role in giv­ing rise to the Web3 con­cept along­side trig­ger­ing most juris­dic­tions to start research­ing cen­tral bank dig­i­tal cur­ren­cies (CBDC),” Live­coins report­ed on August 4. 

Inter­est­ing­ly, the direc­tor revealed that the bank began look­ing into Bitcoin’s prop­er­ties over a decade ago.

“We start­ed to accel­er­ate this in 2009, with the launch of Bit­coin, with dis­trib­uted data­base tech­nol­o­gy that facil­i­tates the cre­ation of Web3. The Bit­coin appli­ca­tion brings the Proof-of-Work (PoW) solu­tion, which is fun­da­men­tal for the ser­vices that Web3 brings to the pop­u­la­tion,” he said.

Bitcoin as a currency 

How­ev­er, Arau­jo ruled out the pos­si­bil­i­ty of Bit­coin being used as a cur­ren­cy cit­ing the asset’s volatil­i­ty as a major draw­back. In this case, the direc­tor explained that there is a need for CBDC since it elim­i­nates the volatil­i­ty case and works as a pay­ment solution. 

“Even though CBDC uses the tech­nol­o­gy that sup­ports cryp­to, CBDC is not a cryp­to asset. The CBDC is an expres­sion of the Real with­in the envi­ron­ment in which cryp­tocur­ren­cies oper­ate, in the same way that the Real does not com­pete with list­ed assets,” he added. 

He con­firmed that the insti­tu­tion is look­ing into the CBDC, with tan­gi­ble results expect­ed to come out in 2024. It is worth not­ing that Arau­jo is the head of the Brazil cen­tral bank CBDC pro­gram and has assert­ed that a pilot project will like­ly be avail­able in 2023. 

Ethereum’s unique properties 

Fur­ther­more, Arau­jo hailed Ethereum’s (ETH) smart con­tract fea­ture and abil­i­ty to pow­er decen­tralised finance (DeFi) as a key tech­nol­o­gy to dri­ve inno­va­tion into the finan­cial sector. 

Con­se­quent­ly, the direc­tor con­firmed that the bank is look­ing to unveil finan­cial prod­ucts that encom­pass fea­tures intro­duced by Bit­coin, Ethereum, DeFi, Web3 and stablecoins. 

Notably, Brazil con­tin­ues to record a surg­ing num­ber of cryp­to investors as dif­fer­ent play­ers jos­tle to con­trol the mar­ket. For instance, Fin­bold report­ed that War­ren Buf­fet-backed­Brazil­ian chal­lenger bank Nubank hit one mil­lion cryp­tocur­ren­cy users bare­ly a month after launch­ing the service. 

Inter­est­ing­ly, the bank antic­i­pat­ed hit­ting the mile­stone in a year of oper­a­tion. Else­where, Mex­i­co-based cryp­to exchange Bit­so also revealed it had reached 1 mil­lion users in Brazil. 

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