Brazil launches Central Bank Digital Currency (CBDC) Project Drex Phase II: Accelerating Asset Tokenization, Strengthening ZK Privacy Protection

The Central Bank of Brazil (BCB) recently launched the second phase of the pilot program for its central bank digital currency Drex, and published the regulations for public consultation, inviting eligible financial institutions to submit innovative business cases aimed at establishing a tokenized infrastructure for the Brazilian financial system.

Overview of Phase One Test Cases

Currently, there are 16 consortia participating in the Drex pilot program, mostly led by banks, primarily exploring the tokenization of bank deposits and bonds for trading and management on decentralized networks. There are currently 13 confirmed test cases available:

• Tokenization of bank deposits
• Tokenization of bonds
• Accounts receivable distribution
• Mortgage loans from national development banks
• Government bond secured loans
• International trade finance
• Optimization of foreign exchange markets
• Government bond liquidity pool
• Transactions with CCB: CCB is a unique form of debt instrument in Brazil, issued by companies to banks as legal proof of borrowing. These notes are collateralized, have flexible terms, and are set based on agreements between companies and banks.
• Assets of an integrated agricultural enterprise: Tokenizing farmland, real estate, machinery, agricultural product inventory for trading on decentralized platforms.
• Asset registration on public networks: Registering various types of assets such as real estate, intellectual property, financial assets on public chains or decentralized networks.
• Transactions related to automobiles, carbon, bonds, and real estate: Decentralized trading of diverse assets such as automobiles, carbon credits, bonds, and real estate.

Drex Phase Two: Expanded Consortium Participation, Enhanced Privacy Protection Technologies

The goal of the second phase of the Drex pilot program is to increase the number of consortium participants and test more complex use cases than the first phase. New companies participating in the second phase will continue to test existing privacy protection technologies, including solutions like Zether, Starlight, Rayls, and ZKP Nova, aiming to ensure that transaction details are not disclosed on decentralized networks and to protect the data security of the parties involved. The Central Bank of Brazil hopes that these solutions will continue to be refined.

The Executive Steering Committee (CEG) of the Drex pilot will be accepting proposals from October 14 to November 29. All participating companies must submit detailed use cases, which will undergo technical and operational reviews by CEG to select proposals that meet the program's objectives for testing.

Brazil's real-linked stablecoin brl1 is now live! Will be issued on Ethereum and Polygon.