Brazilian Central Bank plans to launch Real Digital
Illustrative picture - Source: Pixabay
From Jurassic Park to present day, dinosaurs have kept humankind enthralled with tales of unstoppable creatures. The Jurassic period, also known as the Cretaceous period, ran from about 100 to 66 million years ago. It was a time of great change in the world described in the Bible and the Book of Genesis.
One such change was the appearance of a major new animal species- the dinosaur. Around this time, humankind was just starting to learn how to use tools and fire, which had been used before in hunter-gatherer societies.
Perhaps someone had discovered a cache of dinosaur eggs and decided to experiment with re-creating the animals by using these new methods. Whatever the reason for this theory, it seems plausible that mankind's creation of modern banking systems drew upon these new developments in science and technology. As such, creating a new currency based on superior technology seems like a natural progression.
Since ancient times, minted coins have served as widely accepted means of payment throughout the world. However, there are drawbacks to using physical currency as your primary method of payment.
For one thing, carrying large amounts of physical money can be cumbersome- particularly when traveling from place to place. Furthermore, governments are not required to keep their currency prices stable so that prices can be readily understood by commoners.
In addition, banks charge high interest rates on physical money compared to digital money they hold in their reserves. Although there are many potential advantages to replacing physical money with digital currency, it seems that central banks around the world are slowly but surely moving in this direction.
The Brazilian central bank recently announced plans to launch their very own digital currency dubbed 'Real.' According to the announcement, 'Real' will be a free-floating unit of account used by private individuals and companies within Brazil.
The plan is for 'Real' to replace Brazilian paper currency as soon as possible after its launch. Initially, there will be 100 million units of 'Real' issued by the Bank of Brazil over a period of ten years. However, it is possible that there will be an extension of this timeframe after rigorous testing and analysis has taken place.
Once issued, each Real will be backed by real assets such as gold and precious stones within Brazil's national treasury reserve system. In addition, 'Real' will replace Brazilian paper money at a ratio of 2:1 since each Real has greater value than any previous Brazilian paper currency.
Since 2002, 'Real' has made appearances on internet forums as a possible means for alleviating inflation in Brazil. By creating a digital currency that is fully backed by real assets within the national treasury reserve system, prices may become more stable and less volatile for consumers and businesses alike. Using digital currency instead of paper may also reduce cost for consumers since no additional fees would be required to convert one currency into another.
In addition, businesses may find it easier to calculate price increases due to increases in costs or decreases due to purchases made with digital money. This is because businesses would no longer have to worry about sudden declines in revenue caused by price gouging among competitors who accept digital currency as payment for their goods and services.
As part of its launch plan, 'Real' will replace all other foreign currencies used in exchange with Brazilian reais (BRL). Initially, only two other major currencies - the US dollar and the Euro - will accept replacement within Brazil.
However, it is expected that additional major currencies such as the British pound and Chinese yuan will follow suit once more common people are familiar with using Real within Brazil itself. While replacing foreign currencies is an admirable goal, it's important to note that international trade involving non-real currencies will continue unaffected by this change in monetary policy.
While creating a new form available monetary system is an arduous process fraught with potential benefits, mankind has already succeeded where dinosaurs once sought investors' profits in fictional Jurassic Park scenarios. Today banking practices seem so natural that no one thinks twice about using bank accounts or electronic money.
Posted Using LeoFinance Beta