The Central Bank of Brazil has commenced testing of its central bank digital currency (CBDC) project, expected to foster an increased inclusion of individuals in the financial sector.
Also, the Thailand government is willing to offer tax breaks for companies that issue digital tokens for investment purposes.
Brazil Kicks off CBDC Pilot
According to Reuters on Monday (March 6, 2023), the coordinator of the CBDC project at the Brazilian central bank, Fabio Araujo, said that widespread use of the digital real is expected to happen in 2024 after the completion of the pilot. Part of the testing phase will include individuals buying and selling federal bonds and subsequent evaluation.
The report also said the Brazilian CBDC will be a blockchain-based payment that supports retail transactions. This payment will be backed by the customer’s deposits in their bank accounts. In this way, banks will not be disintermediated, as they will exist within the CBDC matrix. As such, they will not lose their credit source.
A statement from Araujo said:
“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.”
The central bank executive added:
“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.”
Araujo said the proposed CBDC initiative is not intended to interface with digital payment rails, as Brazil’s existing payment system Pix already fulfills the purpose.
Apart from Brazil, other countries are also conducting CBDC pilots. As previously reported by CryptoPotato, Japan’s apex bank is looking to begin experimenting with its CBDC project in April 2023. India’s retail digital rupee pilot, which began in Dec. 2022, has onboarded 50,000 users and 5,000 merchants.
However, in the United States, Representative Tom Emmer recently introduced a bill to stop the issuance of a digital dollar.
Thailand’s Crypto Tax Break
In other news, Thailand is waiving corporate income tax and value-added tax (VAT) for companies issuing digital tokens. According to a Reuters report, digital token investments will serve as an alternative means of raising capital for companies, in addition to existing traditional methods such as debentures.
A government spokesperson, Rachada Dhnadirek, said the tax breaks could cost the Thai government 35 million baht ($1 billion) while stating that the country could see investment token offerings worth 128 billion baht ($3.71 billion) over the next two years.
The latest development comes with Thailand employing strict regulatory oversight in the crypto industry in recent times. In Sept. 2022, the country’s Securities and Exchange Commission (SEC) banned crypto firms operating in Thailand from offering cryptocurrency staking and lending services. Earlier in the same month, the Thai SEC launched stringent regulations for crypto advertising.
Following the collapse of former crypto exchange giant FTX, Thailand’s regulatory watchdog said it would implement tougher crypto regulations to protect investors.