Central Bank of Brazil launches XLM blockchain-based CBDC for millions of people

• With the pilot test of Digital Real, the Brazilian government wants to replicate the success of its instant payment system Pix.
• The Brazilian central bank is piloting the Stellar blockchain as it is highly functional and designed for mass enterprise adoption.

All major economies around the world are looking to launch their own central bank digital currency (CBDC), and the Latin American country of Brazil is the latest to conduct a CBDC pilot. According to the latest report from Reuters, Brazil’s central bank has officially launched the pilot of its experimental CBDC.

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

Fabio Araujo, the Brazilian central bank governor who coordinates the whole CBDC project expects the public use of Digital Real to happen by the end of 2024. Of course, the adoption should happen after a successful test phase as well as after the subsequent evaluation of feedback.

The Brazilian central bank is piloting the Stellar blockchain as 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 a decentralized on-chain identity process.

Although the Brazilian central bank has chosen the Stellar blockchain for the pilot tests, there is no certainty that they will choose the same blockchain for actual issuance. The test phase of Digital Real will include the buying and selling of federal government bonds among individuals.

Brazil’s CBDC Ambitions

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

This environment reduces costs and enables financial inclusion for people. You have services that are very expensive to carry out, for example repo operations, which are currently only for banks, but could be carried out by anyone with a technology based on digital currencies.

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This can reduce the cost of credit, the cost of improving the return on investment. There is 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 will exist in a more modern environment. “Banks are very interested in this new tokenized world, in every conversation we’ve had they’ve shown a lot of interest,” Araujo said.

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