The Central Bank of Brazil said the recent pause in using blockchain for drex, its central bank digital currency project, is temporary. The bank intends to continue using decentralized technology in the future, including issuing its own currency for tokenization-linked settlements.
Central Bank of Brazil: Drex CBDC Project Still Alive
The Facts
The Central Bank of Brazil has clarified the current state of drex, its multi-year-long central bank digital currency (CBDC) project, after having terminated the decentralized platform that served as a base for the first two phases of the pilot.
According to statements issued to local media, the reason for this would be that the third phase of the pilot would ditch blockchain to center on allowing tokenized assets to be registered as collateral for other transactions.
“Phase 3 of the drex pilot project will begin next year with a focus on using assets as collateral for credit operations,” the bank stated.
Nonetheless, the institution reinforced that this abandonment would only be temporary and that the establishment of a comprehensive platform that allows for the use of smart contracts in an interoperable and programmable way continues to be key for drex’s future.
The bank declared:
The tokenization of assets on the platform, with the use of settlement currency offered by the central bank, remains the ultimate goal of the project.
This leaves no doubt that issuing some kind of digital currency, designed to be used for settlements, is still in the plans of the institution and remains part of the drex’s roadmap.
Why It Is Relevant
Reports that hinted at the abandonment of a retail digital goal for the project, alongside statements of the bank’s authorities disregarding the payments function of drex, suggested that at least, the institution was shifting priorities.
Even with these remarks, the technical problems to issue a digital real remain, as the bank has not devised a way of maintaining transaction privacy while allowing regulators to scrutinize these movements at the same time.
Looking Forward
Brazil maintains the goal of issuing a digital currency in the future, but has failed in offering a date for its issuance, reinforcing the experimental character of this initiative. While stressing that it remains a priority, the central bank also hinted that it is far from being complete, and its implementation is uncertain at this point.
FAQ
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What recent update did the Central Bank of Brazil provide about the drex project?
The Central Bank clarified that it has wound down the decentralized platform for drex, shifting focus to using tokenized assets as collateral in the next phase. -
What is the focus of Phase 3 of the drex pilot project?
Phase 3, set to begin next year, will concentrate on allowing tokenized assets to be used as collateral for credit operations. -
Will a digital currency still be part of the drex initiative?
Yes, the central bank reaffirmed its commitment to develop a comprehensive platform that includes digital currency features and smart contracts as part of drex’s roadmap. -
What challenges does the project still face?
The central bank is grappling with technical issues, primarily around maintaining transaction privacy while allowing for regulatory oversight, making implementation uncertain.