Payments giant Visa has recently revealed a new central bank digital currency (CBDC) project that aims to support the Brazilian economy, specifically focusing on small and medium-sized enterprises. Farmers, who contribute a significant portion of Brazil’s GDP, are the primary target market for this project as they are in dire need of new financing options. Presently, the available funding sources for Brazilian farmers are hindered by high interest rates and other bureaucratic issues that negatively impact their operations. Visa’s innovative solution allows farmers to create tokenized contracts on the Ethereum blockchain for global investors to back local agricultural endeavors.
Visa’s CBDC project utilizes its proprietary technology called the Universal Payment Channel (UPC) to enable interoperability among various forms of digital assets. To comply with Know Your Customer (KYC) and anti-money laundering regulations, Visa has partnered with Microsoft for this project. According to Vanesa Meyer, Visa’s head of Innovation and Design, “When we introduce new blockchain-based technologies, we are able to help small and medium-sized business finance their operations in a simpler, more accessible, and secure way.”
In early 2022, the Brazilian central bank selected nine companies, including Visa, from a pool of over 40 to explore real-world use cases for the digital real. The other firms that were selected include DeFi platform Aave, Banco Santander Brasil, and Itau Unibanco. Aave will explore the potential of peer-to-peer lending, while Banco Santander Brasil and Itau Unibanco will research the tokenization of real-world property and international payments, respectively. The official launch date for the digital real has yet to be announced. However, in March, the CBDC made its first appearance on a publicly distributed ledger to gauge interest.
As central banks worldwide begin to implement CBDCs, the list of potential use cases continues to expand. Many central banks are focusing on cross-border payments as a viable means of increasing adoption rates, given the potential for reducing remittance costs. The People’s Bank of China (PBoC), for example, has integrated offline payments functionality in its CBDC pilot and has given the green light for it to be used in securities trading. Moreover, by incorporating the “red envelope” functionality in the digital yuan—aligning with Chinese New Year traditions—the PBoC has successfully increased the number of users for the digital currency.
Visa’s blockchain-backed CBDC project for Brazilian farmers represents a significant step in promoting financial inclusion and reducing the difficulties faced by small and medium-sized enterprises in securing funding. By allowing farmers to create tokenized contracts on the Ethereum blockchain for global investors to support, Visa is breaking down barriers and simplifying the process for businesses in need of financing. As more central banks and financial institutions explore the possibilities and benefits of CBDCs, the potential increase in financial inclusion and innovation will likely lead to a more interconnected, accessible, and secure global economy.
In conclusion, Visa’s CBDC project for Brazilian farmers is an important milestone in the ongoing efforts to explore and implement blockchain technology in various sectors of the global economy. By focusing on the unique challenges faced by small and medium-sized enterprises, particularly in agriculture, Visa’s solution aims to provide more accessible and secure funding options. With the increasing adoption of CBDCs worldwide, the development of innovative solutions to support businesses and promote financial inclusion will undoubtedly continue to evolve, paving the way for a more connected and efficient global economy.
