Why Brazil’s public instant payment system became so popular — and what that means for crypto

Pix, Brazil’s public instant payment system, is a hit.

According to new numbers published by Brazil’s central bank, Pix has steadily logged increasing transaction volumes since its launch in November 2020. This growth highlights how new financial technologies have the potential to gain massive appeal when they’re free for individuals, quick, easy to use and work in a wide range of contexts. 

The volume of Pix transactions has grown from 30 billion reais (about $5.7 billion today) in Nov. 2020 to 527 billion ($101 billion) in July 2021, according to an August 19 presentation made by Brazil’s central bank president Roberto Campos Neto. Neto was speaking with the New York City-based Americas Society/Council of the Americas. 

Users in their twenties make the most transactions, followed by those in their thirties, data from Brazil’s central bank show. The majority of value the system settled in a typical month is person-to-person, followed by business-to-business transfers. 

Pix users can generate keys by using an identifying piece of information — like a cellphone number or email — to quickly send or receive money without needing to go through the lengthy process of initiating a formal bank transfer. Users have generated more than 294 million keys allowing Pix transactions, based on July numbers. Of these keys, 282.2 million belong to 96.3 million households. Additionally, 6.4 million businesses or legal entities had generated Pix keys. (Brazil’s overall population is around 214 million.)

The instant payment system works with a wide range of transactions, such as sending money to loved ones digitally or paying for some new shoes at a brick-and-mortar store. 

In the past few months, Pix has become the leading method for transactions that don't involve traditional cash, overtaking checks, interbank wire transfers and a form of payment called a “boleto,” an invoice-like document that people can use to pay for goods or services in cash at places like convenience stores in addition to online banking platforms.

Brazil’s central bank has plans to add more features to Pix, including for scheduled payments and cross-border transactions. One upcoming feature is the ability for people to withdraw money from stores, bars or restaurants that have integrated with the Pix system. That will be especially helpful for those living in small towns or rural areas without a physical bank branch. Cash registers will essentially become makeshift ATMs, which will mean that people in those areas can avoid traveling long distances while carrying lots of cash.

The goal of Pix has not just been to offer a substitute for other payment methods, the bank chief said, but to increase payments overall by enabling new business models and providing an affordable way for small businesses or individuals to accept transactions. 

“We actually see people selling things on the street accepting Pix these days,” Campos Neto said.

How digital currency fits in

The success of Pix raises the question of how exactly digital currencies — central bank-backed or not — may fit into Brazil’s financial system. 

According to Campos Neto, Brazilians have strong demand for a fast, transparent, open and secure way of making payments — regardless of the underlying technology behind them.

But continued interest by Brazilians in cryptocurrencies since the launch of Pix seems to have surprised banking officials. In November 2020 Campos Neto said there probably wouldn’t be a need for other digital currencies with a system like Pix in place. Now he says he thinks there is. 

"Contrary to what we expected, what we've seen is a growth in cryptocurrency trading for investment purposes and a very low growth as a means of payment," Campos Neto said on Aug. 25 at the 11th Meeting of the Nucleus of Advanced Studies of Regulation of the National Finance System, according to Agência Brasil, the country's public news agency.

The bank chief did mention during the Council of the Americas Briefing that Brazil is advancing its discussions about a central bank digital currency (CBDC), but did not give many details. The next step is to have an “open discussion with society,” his presentation showed.

Although Brazil is relatively open to cryptocurrencies, it lacks crypto-specific regulations, outside of some rules about reporting larger amounts of crypto assets for tax purposes. Also, companies issuing securities in Brazil — crypto-based or not — need to register with the country’s Securities and Exchange Commission (CVM). 

The CVM has been cracking down on those companies that it says aren’t complying with regulations. For example, Binance recently suspended futures trading on its Brazilian site, according to a report by Brazilian website Portal do Bitcoin further reported by CoinDesk. The action comes after Brazil’s Securities and Exchange Commission (CVM) released an alert in July 2020 that Binance Futures and two entities related to investment company HS Investimentos were not registered to operate in the Brazilian securities market.

On the other hand, the CVM has embraced other crypto-based financial products. It has approved Bitcoin and Ethereum ETFs from QR Capital, as well as two ETFs from Hashdex:  HASH11, which is designed to track the Nasdaq Crypto Index, and “eco-friendly” Bitcoin ETF BITH11.

During the Council of the Americas discussion, Campos Neto emphasized that Brazil is considering a holistic approach to regulating new developments in finance, rather than focusing specifically on how to treat digital currencies.

“For us it’s more than just regulating crypto and regulating stablecoins,” said Campos Neto during the Council of the Americas discussion. It’s, ‘What is the financial regulation of the future?’ The financial market’s changing so much and so fast — it’s all becoming data.”