Brazilian Drex CBDC Drops Blockchain to Launch Next Year

According to local media reports, the Brazilian central bank had to abandon the decentralized element of the CBDC to deliver a solution in 2026, in part due to the immaturity of the privacy solutions presented.

Brazilian CBDC to Ditch Blockchain in Effort to Launch in 2026

The Central Bank of Brazil aims to accelerate the development of a central bank digital currency to deliver a working solution as soon as possible. According to local media reports, drex, the Brazilian Central Bank Digital Currency (CBDC), will abandon most of its tokenization and blockchain elements, targeting a launch date in 2026.

Fabio Araujo, coordinator of the drex project at the central bank, confirmed this change, stating that the new proposal will be delivered in two phases: the first phase will not include a decentralized aspect, with an expected launch next year, and the second phase will continue to implement and mature blockchain technologies.

The implementation of a centralized drex implies that many of the use cases tested during the two phases of the pilot will not be able to be implemented, given the lack of programmability of the underlying architecture. Furthermore, there is no guarantee that the project will continue to use Hyperledger Besu, an open-source, Ethereum-compatible blockchain platform solution that was chosen for drex back in 2023.

Araujo stated that, while the privacy solutions presented for the now-dropped decentralized version of drex, they still need to improve to become part of the security structure of the Brazilian financial system. “We find good privacy solutions, but apparently they’re not enough. We need to put this to the test,” he told Valor Economico.

Privacy has been a roadblock for drex’s decentralized ambitions since last year, when the central bank announced the postponement of the pilot due to the inefficiency of the privacy solutions presented, which lacked the functionality to offer bank-transaction levels of secrecy and verifiability.

Nonetheless, the centralized version of drex will deliver a lien reconciliation solution, which will open the door to credit operations with several kinds of collateral. The tools needed to implement this functionality have not been announced yet.

Read more: Digital Real Pilot to Run on Ethereum-Compatible, Permissioned Blockchain

Read more: Brazilian CBDC Pilot Postponed to 2025 Due to Inefficiency of Privacy Solutions