• With the pilot test of Digital Real, the Brazilian government is looking to replicate the success of its instant payment system Pix.

  • The Brazilian central bank is conducting the pilot test on the Stellar blockchain since it is highly functional and designed for mass enterprise adoption.

Every major economy across the world is looking to launch its own central bank digital currency (CBDC) and Latin American country Brazil is the latest to conduct a CBDC pilot. As per the latest report by Reuters, Brazil’s central bank has officially launched the pilot for its experimental CBDC.

The test for Brazilian CBDC – Digital Real – is currently taking place on the Stellar blockchain network. On Monday, March 6, the Brazilian central bank announced the launch of its digital currency pilot project and is seeking to emulate the success shown by Pix, an instant payment system.

Fabio Araujo, the Brazilian central bank executive coordinating the entire CBDC project expects the public use of Digital Real to happen by the end of 2024. Of course, the adoption shall happen after a successful testing phase as well as after the subsequent evaluation of feedback.

The Brazilian central bank is conducting the pilot test on the Stellar blockchain since it is highly functional and designed for mass enterprise adoption. The tests include Know Your Customer (KYC) verification and anti-fraud procedures, along with traceability and an on-chain decentralized identity process.

Although the Brazilian central bank has chosen the Stellar blockchain for the pilot tests, there’s no surety that they would choose the same blockchain for actual issuance. The testing phase of Digital Real will include buying and selling federal public bonds among individuals.

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Brazil’s CBDC ambitions

Fabio Araujo, who is actively working on Barzil’s CBDC project stated that the Digital Real will be built as means of payment executed on the Distributed Ledger Technology (DLT). Additionally, it will also support the provision of retail financial services settled via tokenized deposits in institutions of financial and payment systems in Brazil. Speaking to Reuters, he said:

This environment reduces costs and brings the possibility of financial inclusion for people. You have services that are very expensive to carry out, such as repo operations, which today are only for banks, but which could be performed by anyone with a technology based on digital currencies.

This could reduce the cost of credit, the cost of improving the return on investments. There is a great potential for new service providers, fintechs, democratizing access to the market and offering new services.

Araujo further added that bank deposits will continue to exist with the Brazilian CBDC, but would exist in a more modern environment. “Banks are very interested in this new tokenized world, in every conversation we have they have shown a lot of interest,” said Araujo.