Money in circulation ends 2021 at R$339 billion, the first setback since the beginning of the Real Plan

Amid reduced demand for paper money and increased digitalization of payments, the volume of cash in circulation ended last year at R$339.01 billion, down 8.5% from 2020 according to BC data. (Central bank).

This is the first setback since the beginning of the Real plan, in 1994, the beginning of the historical series of the monetary authority.

On December 31, there were 7.64 billion banknotes and 28.64 billion coins in the hands of Brazilians.

According to the BC, in 2020 there was an unusual increase in cash in circulation with the Covid-19 pandemic, especially due to the payment of emergency aid.

In the period, the total amount reached R$ 370.44 billion, 32% above the previous year and the highest in the historical series.

“In 2020, partly due to the effects caused by the health crisis, the circulating medium presented an atypical growth, well above the average annual growth observed in the last years before this period. Currently, although lower than the value of 2020, the circulating medium is still above the value it would have reached if it had maintained, since 2019, the same previous average growth”, explained the municipality.

At the beginning of 2022, however, the circulating medium started to grow again. Until last Friday (7), the volume was R$ 339.93 billion, R$ 920 million more than on the last day of last year.

The drop in cash in circulation in 2021 coincided with the launch of Pix in late 2020.

The instant payment system was quickly adopted by the population and replaced part of traditional electronic transfers, such as DOC (Credit Order Document) and TED (Available Electronic Transfer), and operations with paper money.

Since its launch, the system has generated more than R$4 trillion.

The total number of transactions in a day with Pix hit a new record last Friday, with 52.3 million operations. According to the BC, the highest number had been reached on December 21, with 51.9 million transactions in 24 hours.

The monetary authority stressed that, despite the evolution of the use of digital payments, the amount of money in circulation traditionally grows year by year.

“With regard to Pix, the emergence of new means of payment always has impacts on the habits of use of previously existing means of payment, and it takes some time for the evolution of these impacts to be clearly mapped”, said the municipality.

The BC is now working towards the launch of the Brazilian digital currency, called Real Digital. The idea is that tests with the new monetary model will be done with consumers until 2023.

Virtual money should help reduce the use of in-kind resources. It is a new form of representation of the currency already issued by the monetary authority, ensured and managed by the State.

At the beginning of the health crisis, there was a rush to ATMs and the increased demand for cash resources led the BC to issue a R$200 note in August 2020.

Demand for the new banknote, however, was lower than initially expected. The municipality acquired 94.2 million units until Friday (7). The amount is equivalent to R$ 18.8 billion.

At the launch of the banknote, the BC had announced the manufacture of 450 million banknotes stamped with the maned wolf (R$ 90 billion) in 2020 alone.

The BC states that currently “the rate of use of the 200 reais banknote has been evolving in line with expectations, showing gradual growth corresponding to demand, as would occur with any new denomination”.