SAO PAOLO, Brazil: The Brazilian central bank has announced the start of a pilot project for using a new digital currency, the Brazilian central bank digital currency, with the aim of replicating the success of its instant payment system, Pix, and popularizing financial services in the country.

Fabio Araujo, coordinator of the initiative at the bank, said that the public use of digital currency should begin at the end of 2024, adding that the "digital real" will be developed as a means of payment executed on distributed ledger technology, to help provide retail financial services settled through deposits in Brazilian financial and payment systems institutions.

"This environment reduces costs and brings the possibility of financial inclusion for people. You have services that are very expensive to carry out, such as repo operations, which today are only for banks, but which could be performed by anyone with a technology based on digital currencies," Araujo said, as reported by Reuters.

"This could reduce the cost of credit, the cost of improving the return on investments. There is a great potential for new service providers, fintechs, democratizing access to the market and offering new services," he added.

As Pix, which was launched at the end of 2021 and has been widely adopted in Brazil, is already leveraging digital payments, the digital currency is not intended to cover exactly the same territory, Araujo stressed.

Instead, bank deposits would continue to exist within the Brazilian banking system, only being registered in a more modern environment, therefore, financial institutions would not lose this source of funds for credit generation, he added.

"Banks are very interested in this new tokenized world, in every conversation we have they have shown a lot of interest," he noted.