Brazil’s CBDC Trial Advances to Next Phase

Banco Central do Brasil (BCB) has revealed that the digital real (CBDC) pilot initiative, referred to as Drex, has progressed to a new phase. This phase includes participation from 16 consortiums and major financial institutions. The focus of the second phase will be on enhancing the foreign exchange market, testing smart contracts, and launching innovative financial services.

Banco Central do Brasil (BCB) has announced that Drex, the pilot project for the digital real, has moved into its second phase. In collaboration with the local Securities and Exchange Commission (CVM), 16 consortiums and major financial firms have been chosen to test the CBDC and develop features across 13 designated areas of the project’s advancement.

The objective of the second phase is to establish the necessary infrastructure for the integration of smart contracts and to provide innovative financial services. Participants will investigate ways for Drex to improve current operations in the financial market.

Participants in the second phase of the Drex pilot include:

• payment leaders Visa and Mastercard;
• XP Investimentos, one of the largest investment platforms, and Nubank, a Brazilian neobank;
• Banco Santander, the largest financial and credit group in Spain, and Itaú Unibanco, a leading bank in Latin America;
• Banco Bradesco and BTG Pactual, top investment banks in Brazil;
• São Paulo Stock Exchange (B3), the largest stock exchange in Latin America;
• The Brazilian Federation of Banks (FEBRABAN);
• state-owned banks in Brazil, Banco do Brasil and Caixa Econômica Federal (CEF);
• local cryptocurrency exchange Mercado Bitcoin;
• PagSeguro, TecBan, and Stone, local providers of technological solutions for electronic payments and financial automation.

Out of the 42 proposed use cases for Drex, 13 have been selected for this new phase of testing the digital real, with BCB concentrating on the implementation of financial services through smart contracts created and overseen by third parties. Visa will collaborate with XP Investimentos and Nubank to enhance the foreign exchange market, while Banco Santander will spearhead initiatives related to the automotive sector and decarbonization. The Brazilian SEC (CVM) will oversee two projects involving digital securities. The pilot will also investigate the application of CBDCs for collateralized loans, financing foreign trade transactions, bank credit note transactions, and real estate dealings.

The second phase is set to continue until the end of 2024. In early 2025, BCB intends to invite a new cohort of companies and organizations to directly develop smart contracts for Drex.

The Brazilian authorities initially announced the introduction of the CBDC in 2022. The first phase of the Drex pilot project commenced in 2023, when the digital currency was officially named.

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