The Central Bank of Brazil is inviting companies to apply for the second phase of its Central Bank Digital Currency (CBDC) pilot, known as Drex. The pilot aims to enhance Brazil’s financial system through tokenization and explore complex use cases. Applications will be accepted from October 14 to November 29.
During the first phase of the pilot, 16 consortiums, mostly led by banks, tested the registration of the Brazilian real on a decentralized digital network. The project also explored tokenized federal government bonds. Now, in the second phase, the Central Bank of Brazil is looking to expand beyond the initial consortiums and explore more complex use cases, such as loans backed by custodial assets, carbon credits, agribusiness bonds, and foreign trade transactions.
The Central Bank is interested in adding more participants and exploring advanced technology applications. However, the challenge of securely hiding transactions between participants on a scalable level has yet to be resolved.
João Pedro Nascimento, president of the Brazilian Securities and Exchange Commission (CVM), believes that tokenization is a permanent business model and that integrating blockchain into traditional financial assets can improve the distribution of investment products. However, experts caution that blockchain technology is not a one-size-fits-all solution and stress the importance of governance in distributed systems.
Brazil is also accelerating its Open Finance platform, which aims to enhance tokenization initiatives nationwide. The platform will serve as a marketplace that offers various banking and payment options, including CBDCs. This initiative is part of a global trend, with Brazil being among 65 countries in advanced stages of CBDC development.
In addition to government initiatives, private crypto firms are also working to expand digital asset payment options for Brazilians. Ripple recently announced a partnership with Mercado Bitcoin, a leading Brazilian cryptocurrency exchange, to launch cross-border crypto payments that are faster, cheaper, and more efficient.
Overall, Brazil is actively pursuing CBDC development and tokenization initiatives to enhance its financial system and foster innovation in the sector.
