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Brazil is looking for ways to ensure that its central bank-issued digital currency Drex is unique.
Key Notes
Brazil aims to resolve decentralization, privacy, and programmability issues with its Drex CBDC.Drex introduces tokenization and DeFi elements into the country's financial system.Brazil is looking for ways to make its central bank-issued digital currency (CBDC) Drex unique. One way it has thought to do so is by introducing decentralized finance (DeFi) principles into its ongoing experiment with Drex.
At the moment, the digital currency is still in its developmental phase. So, the country is exploring ways it can introduce known elements of DeFi into Drex in a manner that will likely reshape banking and payment systems. Like in every other nation, Brazil’s central bank, Banco Central do Brasil, is in charge of the Drex CBDC pilot.
Brazil’s Double Efforts: Drex CBDC and Open Finance
According to the bank’s president, Roberto Campos Neto, Brazil does not just need a CBDC. It needs a multidimensional one.
He identified decentralization, privacy, and programmability as three areas that traditional markets struggle to overcome and hopes that the Drex CBDC should, at least, be able to address those needs.
Neto shared the plan on Thursday while presenting for a Markus’ Academy presentation on The Future of Financial Intermediation. He said:
“We wanted to have three dimensions of benefits that you can not get on just a normal CBDC. We wanted to insert the tokenization concept into the balance sheet of the banks.”
Notably, Brazil is not only fixated on incorporating DeFi principles into its CBDC. The country is also ramping up its nationwide tokenization efforts through an Open Finance platform.
This idea is to create a marketplace where users can access a wide range of financial services, including CBDC transactions, with various banks and payment options. The central bank believes that the Open Finance system will foster competition and increase consumer choice in the financial sector.
What Next?
Brazil may have experimented with decentralization elements in the first phase of the CBDC pilot. However, it is now focused on perfecting other aspects of it to ensure its full compatibility with DeFi ecosystems.
To this end, the second phase of the pilot, which has already begun, will focus on digital asset transactions, including liquidity pools for government bonds and international trade finance.
This phase is expected to continue into 2025, as the government works on perfecting the CBDC’s compatibility with DeFi ecosystems.
On one side, the Brazilian government is intensifying digital currency efforts. Whereas, on the other hand, private sector companies are also contributing their bits to Brazil’s digital asset space. On Thursday, payment network Ripple announced a partnership with Brazilian exchange Mercado Bitcoin.
This combination of efforts from both public and private sectors could help to position Brazil as a global leader in the digital finance space.
Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to deliver accurate and timely information but should not be taken as financial or investment advice. Since market conditions can change rapidly, we encourage you to verify information on your own and consult with a professional before making any decisions based on this content.
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Mayowa is a crypto enthusiast/writer whose conversational character is quite evident in his style of writing. He strongly believes in the potential of digital assets and takes every opportunity to reiterate this. He's a reader, a researcher, an astute speaker, and also a budding entrepreneur. Away from crypto however, Mayowa's fancied distractions include soccer or discussing world politics.
