Brazil’s central bank has officially opened applications for organizations wishing to participate in Brazil’s central bank digital currency pilot called Drex. The registration lasts from October 14 to November 29; the members’ proposals essentially entail exercising tokenized currency options in the financial system specific to Brazil.
The pilot, who goes by the name Drex, is now in the second stage. The Central Bank of Brazil has said that it has approved 13 actual digital use cases, which include government-backed loans, agribusiness assets, auto negotiations, carbon credits, debentures, and real estate. This phase is about finding more individuals willing to participate and investigating more subtle use cases beyond the ones investigated during the first trial.
Brazil expands Drex pilot to increase participants and tackle privacy challenges
According to a report by Valor, the Drex pilot’s EMC shall be responsible for considering applications submitted during the window. The bank wants more participants added as it will facilitate the deployment of the digital currency, which remains part of the country’s financial systems’ future.
The first of the four phases aimed at exploring the implementation of tokenized real in a decentralized environment through 16 consortiums, most of which are hegemonic by banks. During these trials, bank deposits and federal government bonds in tokenized form for trading were prominently used. This was the first step that Brazil would take in integrating digital currency into the existing economy.
However, challenges remain. The Central Bank defined that participants must proceed to experiments to advance privacy solutions, as four of the applications submitted in the first phase did not provide a scalable solution to ‘bury’ transactions between participants and keep their privacy intact.
Drex, a CBDC of Brazil, is meant to create a groundwork that could revolutionize the tokenization process in the Brasileiro financial space. João Pedro Nascimento, President of B3 and CVM Brazil, has recognized the role of tokenization as “here to stay” for a business model. Nascimento also underlined the importance of becoming an inclusive sector that is “regulatory-compatible” with the existing financial systems.
Nascimento also stressed that including conventional financial securities in blockchains may enhance the distribution of investment products, which also shows the potential benefits of Brazil’s CBDC.
Brazil Registers to the Global CBDC Movement
Brazil is striving to foster digital currencies such as Drex, which are among the global central bank digital currencies. Based on information from the Atlantic Council, as many as 134 states contemplate holding CBDCs, while 65 countries, including Brazil, are at an advanced stage of CBDC development.
For instance, the Chinese authorities have been advancing in developing their central bank’s digital currency, the digital yuan (e-CNY). Of the 180 million personal wallets opened, ¥7.3 trillion ($1.02 trillion) were transacted in the digital renminbi system until October 11, out of ¥50 trillion ($6.9 trillion) legally targeted in the official 14th five-year plan.
By incorporating Drex, Brazil is becoming the go-to country for innovation in digital currencies. It strives to modernize its financial system to embrace the digital world but, in equal measure, seeks to protect consumers from unscrupulous regulators. With applications flooding in for the second phase of the pilot project, the country is ‘‘ideally positioned to unlock further additional use cases for Tokenized currency across sectors of the economy’.
