Brazil’s Central Bank Launches New Phase of Drex CBDC Pilot

Key Takeaways

• Drex pilot, now in its second stage, focuses on pushing the digital real beyond basic tests into more advanced scenarios.
• From October 14 to November 29, companies can submit their proposals for participating in the CBDC project

The Central Bank of Brazil has opened applications for organizations interested in joining the next phase of its central bank digital currency (CBDC) pilot, Drex. From October 14 to November 29, companies can submit their proposals for participating in the project, which explores the integration of tokenized digital currency within Brazil’s financial system.

This next phase of the Drex pilot aims to expand the scope of testing by allowing new consortiums to propose and explore more complex use cases for the tokenized real. These proposals will be evaluated by the project’s Executive Management Committee, which will select participants to join the 13 use cases already approved in the first round. Among these existing use cases are applications involving credit collateralization, government-backed loans, carbon credit platforms, and international trade financing.

The Drex pilot, now in its second stage, focuses on pushing the digital real beyond basic tests into more advanced scenarios. As per the official announcement, during the first phase, 16 consortiums, many of them led by major banks, were involved in trials exploring how the tokenized real could be integrated into financial transactions, including the use of tokenized government bonds and bank deposits.

This phase of the project will also place greater emphasis on developing robust privacy solutions. Several initial applications failed to provide the necessary levels of privacy protection, and the Central Bank is now prioritizing the search for scalable solutions that will protect user transactions while maintaining the functionality of the Drex platform.

The Drex pilot has attracted participation from leading global companies, including AWS, Google, Mastercard, Santander, Visa, and Brazilian fintech Nubank. These organizations, either through consortiums or as standalone partners, are expected to play a key role in testing various use cases in areas like real estate transactions, trade finance, and collateralized credit.

Several countries apart from India are running pilot programs to assess the viability of CBDCs. CBDCs have already been launched in the Bahamas, Nigeria, and Jamaica among others.

The International Monetary Fund has dubbed CBDCs as “a safe and low-cost alternative” to cash, with almost 60% of countries in the world exploring CBDCs.

While CBDCs are gaining positive traction across the world, some states are also wary of CBDCs. Earlier this year, the US State of North Carolina passed a bill prohibiting state agencies and courts from accepting payments using CBDC. The NC Governor Roy Cooper has vetoed the bill deeming it vague and reactionary.