Brazil’s Central Bank Advances with Real Digital Pilot Program

On Wednesday, Brazil’s central bank (BCB) announced the selection of 13 participants for the second phase of its central bank digital currency (CBDC) pilot program, known as Real Digital. This initiative aims to explore the potential of digital currencies in enhancing the efficiency and security of financial transactions within the Brazilian economy.

The BCB, along with the Brazilian Securities and Exchange Commission (CVM), received a total of 42 project proposals for this second phase, referred to as Drex. In a statement, the BCB highlighted that it will oversee 11 of these projects, while the CVM will supervise two. This collaborative effort underscores the importance of regulatory oversight in the development and implementation of digital currencies.

In this second phase, the pilot program will focus on testing the infrastructure designed for Real Digital. Specifically, it will explore the implementation of financial services through smart contracts that are created and managed by participating third parties. This innovative approach aims to streamline processes and enhance the overall efficiency of financial transactions.

The selected projects include notable global corporations such as Visa, which is partnering with Brazilian brokerage XP and digital bank Nubank. Their collaboration aims to optimize the foreign exchange market, potentially making currency exchanges faster and more cost-effective for consumers and businesses alike.

Additionally, Spanish banking giant Santander has been selected to work on multiple projects, one of which involves automotive operations, reflecting the bank’s commitment to integrating digital currency technology within various sectors. Another project under Santander’s purview is focused on lending and decarbonization, highlighting the role of digital currencies in promoting sustainable financial practices.

The second phase of the pilot will also include participation from significant local financial institutions such as Bradesco, Itaú Unibanco, and the Brazilian stock exchange B3, which further emphasizes the widespread interest in digital currencies across the financial landscape in Brazil.

Furthermore, the BCB has announced plans to open a new call for firms interested in joining the Drex pilot in the third quarter of 2024. This future phase is expected to focus on testing the implementation of smart contracts, with the aim of achieving this by the end of the first half of 2025. Such advancements could pave the way for more innovative financial solutions and a more robust digital economy.

It is important to note that this initiative is part of a broader global trend, where countries are increasingly exploring the potential of CBDCs to modernize their financial systems. By launching the Real Digital pilot, Brazil aims to position itself as a leader in the digital currency space in Latin America, promoting financial inclusion and technological innovation.

In May 2023, the BCB had already selected 14 participants for the initial phase of the Real Digital pilot. The ongoing developments indicate a strong commitment from the central bank to refine and implement a digital currency system that could significantly impact Brazil’s economy and its financial infrastructure.

• Key Participants in Real Digital Pilot:
  • Visa
  • XP (Brazilian brokerage)
  • Nubank (Digital bank)
  • Banco Santander (Spanish banking giant)
  • Bradesco (Local financial institution)
  • Itaú Unibanco (Local financial institution)
  • B3 (Brazilian stock exchange)
• Future Developments:
  • New call for participants in Q3 2024
  • Testing of smart contracts expected by mid-2025