Yesterday afternoon, Banco Central do Brasil announced the formal start of its digital real central bank digital currency (CBDC) pilot, with the final rollout expected by the end of 2024. The CBDC is based on a distributed LEDGER technology (DLT) designed to settle wholesale interbank transactions. However, retail access will be enabled through tokenized bank deposits. The central bank also said the Treasury is contemplating issuing tokenized government bonds.
Pilot transactions will target instant settlements to ensure delivery versus payment (DvP) of financial assets with some programmability. Crucially, this will allow transactions between banks using the CBDC, with instant settlement at the end customer level using deposit tokens. The central bank also wants to test the privacy of these transactions. Rather than real transactions, initially the pilot will involve simulations.
One of the main reasons the CBDC will not target mainstream retail payments is the success of Brazil’s “Pix”, an instant payment method that allows individuals and organizations to transfer and receive money, make purchases, and pay bills.
The development and testing phase will run until February 2024, after which the assessment stage will begin. During the pilot stage, participation will be restricted to a limited number of entities and a restricted set of opening hours. A consultation Forum will explore policy issues. Other organizations involved are the National Treasury Secretariat (STN) for the potential government bond tokens and the Securities and Exchange Commission (CVM) to provide input for future phases, which will involve CVM-regulated securities.
The chosen platform for the pilot is a permissioned version of the Hyperledger Besu blockchain client due to its compatibility with an Ethereum Virtual Machine (EVM).
More to follow.
