Fintech CEO: Brazil in Unique Situation as it Considers CBDC Future

Recently, Central Bank of Brazil Director João Manoel Pinho de Mello announced at a panel discussion that the country would see a migration to digital payments over the next few years. This would involve a CBDC, Valor Economico reported. While noting that care must be taken to get the process right, CBDCs can help expand the banked population while mitigating the use of digital currencies promoted by other nations, thus protecting the national interest.

“Brazil is in an interesting situation because they really are an economic leader in the region. Brazil, more than, perhaps, most countries, can afford to take their time and ensure they develop quality technology that delivers the intended results. It sounds as though they are just as focused on education and adoption as they are on the technology, and I think that’s something that’s going to be critical when we look back and discuss the winners and losers of this technological and financial revolution,” said Richard Gardner, CEO of Modulus, a US-based developer of ultra-high-performance trading and surveillance technology that powers global equities, derivatives, and digital asset exchanges.

“As a fintech CEO, you might think that I’m all about the technology. And, having the best technology is important. I’ve spent a whole career working to ensure that our technology was on the cutting-edge of what’s possible. But, what’s important to understand about technology is — it doesn’t matter how good your technology is if it isn’t used properly, or, in the case of a CBDC, at all. The citizenry really needs to buy-in and adopt their nation’s CBDC in order for the development to be effective and worthwhile,” said Gardner.

“We understand that the use of CBDC will occur in situations where it is able to bring greater efficiency and transparency to transactions, whether from the retail perspective or its use by agents that make up the financial and payments industry,” said Mello. The central bank added that “[a]ccording to the current BCB assessment, the conditions for the adoption of a Brazilian CBDC will be achieved in two to three years.”

“Adoption. That’s something that some countries seem to be putting more emphasis on than others. New Zealand, in particular, seems very intent on making sure that their citizenry is educated on the benefits of a CBDC and that they will be willing to, by and large, adopt it once it is launched. Building the technology is a major hurdle. But getting the populace to buy-in will be just as big a lift. It is smart to begin to plan for the implementation now,” said Gardner.

“This isn’t really different from any public policy or business initiative. The innovation is only as good as the implementation. It doesn’t matter if you develop a new recycling program if the public isn’t trained on how to utilize it properly. That was a big issue surrounding single-stream recycling. It doesn’t matter if you build a new stadium if the people won’t attend the games. I think that the education component of launching a CBDC could, realistically, take years. So, when you look at Brazil’s timeline and their word choice – that the ‘conditions for adoption’ will be achieved within two to three years… I think that’s a fair statement,” said Gardner.

Modulus is known throughout the financial technology segment as a leader in the development of ultra-high frequency trading systems and blockchain technologies. Over the past twenty years, the company has built technology for the world’s most notable exchanges, with a client list which includes NASA, NASDAQ, Goldman Sachs, Merrill Lynch, JP Morgan Chase, Bank of America, Barclays, Siemens, Shell, Yahoo!, Microsoft, Cornell University, and the University of Chicago.

“When I talk about how the race to develop a CBDC is akin to this generation’s Race to Space, in some ways that race isn’t even about building the technology. You may be the fastest to build the technology, but if your populace is the slowest to adopt it, then you’re no longer first,” said Gardner. “This is where having a strong culture of innovation and technological advancements will be helpful. For countries that are going to need help in that arena, they really can’t start discussing the process and the benefits of digital currencies soon enough.”