Brazil’s government has just launched a R$ 200 note while the Central Bank hints at a possibility of a digital currency.
The plans for the new note have been in the making for a while but the coronavirus pandemic accelerated its launching process.
Brazil’s Central bank put into circulation the new R$ 200 note last week. While some have been alarmed that was a result of a greater devaluation of the Brazila Real, the official version is a bid to have more cash in circulation.
According to the Central Bank, people went to ATMs less often, withdrew more cash every time and kept the cash at home, because of coronavirus lockdowns. Also, with shops and businesses closed during quarantine, that decreased significantly the volume of cash in circulation.
Another reason was to help those receiving the government’s financial support aimed at self-employed and informal workers that had their incomes affected by the coronavirus (Covid-19) crisis.
But some political parties and anti-corruption entities questioned if there was a real need for a higher value bank note. They pointed out that high value notes make it easier for criminal activities and money laundering.
Another point was that introducing more bank notes (high value or otherwise) goes against the global trend decreasing the cash volume in circulation and promoting a higher digital financial inclusion, especially in emerging economies.
A digital currency for Brazil: rumors or reality?
Amid the new bank note controversy, Roberto Campos Neto, president of Brazil’s Central Bank hinted that after a major government payments system about to be released next November—could lead to the launch of a digital coin, as Contxto reported.
The Instant Payments Platform, or PIX for short, is a payment solution that uses QR codes to process transactions. It is promised to be accessible for anyone with a bank account, with any incumbent bank or fintech. Also, SMEs can use the platform to offer customers electronic payments. The result would be the rise of new businesses and less use of cash, according to the Central Bank.
“PIX is very important because from here on out, we’ll see the merging of instant payments that’s open and cannot be tampered with thanks to its open data system. And at some point in the future it will stand alongside a coin that needs to be perfected,” added the Central Bank’s President.
Brazil is a walking contradiction, in one hand you have more cash pumped into the country and on the other hand, a digital payment platform set to promote more financial inclusion, and even a plan for a digital currency. Who’s going to win? My guess is good as yours.