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Payments giant Visa (NASDAQ: V) has unveiled a central bank digital currency (CBDC) project as part of efforts to explore new use cases for the Brazilian economy.
The new project places a premium on small and medium-scale enterprises within Brazil to help them gain access to global funding and improve operational processes, local news outlet Livecoins reported. Farmers appear to be the target market of Visa’s project, noting that they contribute a large chunk of Brazil’s GDP and are in dire need of new financing options.
Presently, funding options available to Brazilian farmers are plagued by sky-high interest rates and other bureaucratic bottlenecks that negatively affect their operations. Visa’s new solution allows farmers to create tokenized contracts on Ethereum for global investors to invest in local operations.
Visa notes that its solution stands out from the rest of the pack given the use of its proprietary technology dubbed Universal Payment Channel (UPC) to enable interoperability among different forms of digital assets. The firm roped in Microsoft (NASDAQ: MSFT) to assist with the Know Your Customer (KYC) requirements to comply with anti-money laundering regulations.
“When we introduce new blockchain-based technologies, further democratizing equity financing, increasing market competition, and expanding financial inclusion, we are able to help small and medium-sized business finance their business operations in a simpler, more accessible, and secure way,” Vanesa Meyer, Visa’s head of Innovation and Design, said.
In 2022, the Brazilian central bank selected Visa and eight other firms to explore real-world use cases for the digital real from a pool of over 40 companies that indicated an interest. DeFi platform Aave was selected to explore the possibilities of peer-to-peer loans, while Banco Santander Brasil and Itau Unibanco were picked to research the tokenization of real-world property and international payments, respectively.
It remains unclear when the central bank will launch the digital real, but in March, the CBDC made its debut on a publicly distributed ledger to gauge interest.
Increasing the use cases for CBDCs
Central banks worldwide are integrating many features into their planned CBDCs to snag users away from existing payment options. For most central banks, the option of cross-border payments to reduce the cost of remittance is seen as a viable means of increasing adoption rates.
The People’s Bank of China (PBoC) has integrated offline payments functionality in its CBDC pilot while giving the green light for it to be used in securities trading. Furthermore, the red envelope functionality, in line with Chinese New Year traditions, played a large role in building the growing number of users for the digital yuan.