Brazil’s Digital Currency Advances with Drex Consortium

Brazil’s Central Bank (BC) has announced a second phase for its pilot project, Drex, which aims to create a digital currency infrastructure for the country’s financial system.

The project, launched in 2019, intends to expand the number of consortiums participating and receive more complex use cases than those tested in the first phase, such as loans secured by custodial assets or carbon credits.

For the new phase, 13 use cases are confirmed for testing. These include receivables assignment and credit collateralized by CDBs. Other cases involve loans backed by government bonds and international trade financing. The tests also cover foreign exchange market optimization and government bond liquidity pools. Transactions with CCBs, agribusiness assets, and assets on a public network are also part of the testing phase.

João Pedro Nascimento, president of the Brazilian Securities and Exchange Commission (CVM), said at an event in Rio de Janeiro that asset tokenization is a business model that is here to stay. Nascimento also emphasized that the crypto economy must be integrated into the financial system under proper regulation.

Institutional Crypto Activity Surges in Brazil

The Brazilian economy has been experiencing significant changes in recent years, driven by digitalization, globalization, and the rise of new business models. According to a report by Chainalysis, the monthly value of institutional-sized transactions (over $1 million) rose by about 29.2% between the last two quarters of 2023 and by 48.4% between Q4 2023 and Q1 2024.

André Portilho, Head of Digital Assets at investment bank BTG Pactual revealed various factors behind this rise. “One key factor is the diversification of portfolios, particularly as the market matures. Investors are increasingly integrating digital assets into their asset allocation strategies, viewing them as valuable alternative investments that offer the potential for enhanced returns. The consolidation of Bitcoin and other cryptocurrencies as established investment options has been crucial in this shift,” he explained.

“The notable recovery of institutional activity in crypto assets in Brazil can be partially attributed to regulatory evolution and the entry of American institutions into the cryptocurrency market, especially with the introduction of Bitcoin and Ethereum ETFs,” he added.

Aaron Stanley, founder of Brazil Crypto Report, revealed something similar. “The ecosystem has matured quite significantly. We’ve seen several TradFi banks launch crypto brokerage products (Itaú, the country’s largest bank, for example), and most of the other majors are actively building their own similar products.

We saw major global exchanges, such as OKX and Coinbase, hard launch in the country, complete with local teams and entities. The Drex pilot program — a hybrid CBDC/smart contract platform being developed by Brazil’s central bank — has also prompted TradFi banks to be much more forward-thinking in their digital asset strategies.” he noted.

Gairika holds positions in BTC. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Magazine and The Shib Daily are the official media and publications of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.

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