Portuguese and Brazilian banking executives highlight that central bank digital currencies can significantly lower operational costs and enhance security for cross-border settlements

Banking representatives from Portugal and Brazil say central bank digital currencies (CBDCs) offer lower costs and greater security for international payments, as different countries and regions press ahead with their own digital currencies.

In Macau to attend a seminar on central bank digital currencies organised by the Monetary Authority of Macao (AMCM), Banco de Portugal Executive Director Luís Morais Sarmento highlighted that the digital euro project is in an “advanced stage of technical readiness” and that the objective is to ensure it is “as secure as cash, but adapted to the digital era”.

The event organised by the territory’s monetary authority aimed to “deepen financial cooperation and explore digital currency applications” between China and Lusophone markets.

European digital monetary integration

Issued by the European Central Bank (ECB) and national central banks, the digital euro is intended to function as an electronic equivalent to banknotes, guaranteeing privacy but allowing fast payments across the entire Eurozone.

With a view to an eventual issuance in 2029, the ECB is currently in the technical readiness phase and is assessing applications from more than 50 payment service providers to conduct a pilot project.

Sarmento underlined that payment systems are “an essential element for economic confidence” and that innovation, including digital currencies, holds “strategic relevance” for each country.

The director added that the digital euro could, in the future, support multiple currencies on the same infrastructure, paving the way for greater financial integration between different geographies, including Portuguese-speaking countries.

“No central bank will be able to face the future alone. International cooperation is essential,” he said, pointing to the creation of the network of Lusophone central banks as an example of knowledge sharing.

Representatives from the People’s Bank of China, the country’s central bank, were also present at the same event in Macau, having already advanced with tests for the use of the digital yuan, the first central bank digital currency issued globally.

Sarmento noted that Banco de Portugal has been in dialogue with the Chinese central bank and Macau’s monetary authorities regarding their respective digital currency projects, but only as standard institutional dialogues or “informal events” like the one held today with various Lusophone banking entities.

The representative of the Portuguese central bank said that “each central bank will chart its own course” in the development of digital currencies, noting that Portugal is part of the joint Eurozone strategy.

Tokenisation and testing in Latin America

Meanwhile, Cassio von Gal, chairman of the Brazilian Banks Association (ABBC), said that Brazil is testing the Drex project, launched by the Central Bank in 2023, which brings together financial institutions and regulators in a collaborative environment.

“Central bank digital currencies will reduce layers in the settlement of cross-border transactions, bringing lower costs and greater security,” he stated.

Von Gal expanded on the initiative, explaining that the consortium led by the ABBC developed tokenised financial instruments, including digital bank credit, which demonstrated efficiency gains and cost reductions.

“The pilot showed how programmable instruments can reduce friction in key processes such as issuance, settlement, and collateral management,” he said, underlining that these innovations are particularly relevant for international trade.

Operational efficiency and market risk

The ABBC, which brings together more than 100 financial institutions, led a consortium within the pilot representing 16 small and medium-sized banks, focused on the development of tokenised financial assets.

These assets are digital versions of traditional securities, such as shares, government bonds, and funds, registered on encrypted blockchain networks.

According to Gal, a tokenised bank credit instrument showed “greater efficiency, reduced operational costs, and more liquid and accessible secondary markets”.

However, the Brazilian banking representative commented that challenges persist in this area, such as interoperability, data governance, and cybersecurity, arguing that central bank currencies and tokenised assets should be viewed “as tools to improve financial systems” and “not as ends in themselves”.