Brazil has reportedly halted pilot testing of Drex, its central bank digital currency (CBDC). The pilot of the country’s first CBDC will take place until 2025, as the Central Bank of Brazil has determined that blockchain privacy solutions are insufficient, which could cause financial inconvenience for Brazilian citizens, according to a report that says the South American country has decided to conduct privacy trials on to its CBDC with the help of third-party institutions. This will be the second phase of Drex’s trials, with a major focus on privacy.
Brazil’s CBDC project has reportedly been delayed to 2025
Banco Central do Brasil (BCB) will launch Drax into a second phase of testing in July this year. It is designed to be part of the blockchain system that supports the Ethereum-based Hyperledger Besa. According to a report by Valor Econômico (in Portuguese), the launch of the CBDC has been delayed until 2025. The central bank is looking to fine-tune the country’s financial compliance, banking and tax secrecy regulations.
Cybersecurity companies such as Zether and Parfin are working with Brazilian authorities on security provisions for finance-related blockchain protocols, such as the one used to develop the CBDC. In the coming months, the functionality of smart contracts and wholesale usage on Drex will also be tested.
“It’s already been reported that what Drex is stuck on is the issue of secrecy. Does that mean it’s unfeasible? No, it is possible to think about solutions that guarantee bank secrecy, the problem is that they take away the scope, speed, increase costs or are private solutions, which can create problems in the future,” the publication quoted Rafael Bianchini Abreu, financial risk coordinator at the central to the bank as they say (translated from Portuguese).
India, China ahead of Brazil in CBDC tests
Brazil is currently presiding over the G20 group of countries for the next year. Under his leadership, Brazil will continue work on formulating regulations to govern the blockchain sector. It currently lags behind many other nations exploring the CBDC arena.
India and China and Japan are already conducting public trials of CBDCs. The UK is also in an advanced stage of evaluating the CBDC digital pound.
CBDCs are designed to create a blockchain representation of fiat currencies issued and controlled by central banks. With CBDC transactions, transaction history is recorded on blockchain networks in an immutable format. They are expected to function as an online payment instrument that offers faster transaction speed, concrete history and faster international funds transfer.
