As Brazil moves toward its central bank digital currency (CBDC) rollout, BV Bank has
recorded a new milestone in its experiments with the wholesale offering, DREX.
BV Bank, one of Brazil’s leading commercial banks, has been probing the viability of delivery versus payment (DvP) settlements in automobile transactions. DvP involves the simultaneous transfer of documents linked to securities to prevent traditional settlement risks of failing to deliver after payment.
As part of one of 16 entities participating in the pilot, BV Bank’s expertise as one of Brazil’s leading providers of car financing played an integral role in the studies. Aware of its shortcomings in Web3, the bank turned to blockchain firms Consensys and Parfin to provide technical support for the experiments.
Using DREX, BV Bank disclosed that it was able to link title change and payment, allowing for a seamless DvP transaction. The bank achieves the feat by enabling users to escrow funds using smart contracts for programmability, with titles automatically transferred upon payment release.
A real-world application of this utility will involve several working parts, including a collaboration with the Brazilian regulator for tokenization, B3, and the national Department of Transport.
While the results have been impressive so far, there are concerns that the study was limited in scope without proper real-world trials. It is important to note that at the moment, all transactions linked to DREX are simulations until the Brazilian central bank gives the green light.
BV Bank’s Director of Risks and Operations Renato Bonetti said the bank will continue to explore other applications for DREX to improve operations. Top of the list for the BV Bank is a loan settlement application while keeping an eye on the possibilities of deploying the wholesale CBDC to property transfers.
“We are working to introduce Drex as a tool for loan settlement, guarantee registration and even property transfer, delivering more benefits to customers with more security, agility and practicality,” said Bonetti.
Commercial rollout still in the distance
With several entities confirming new milestones in their pilot studies, analysts are still determining the date for a potential rollout of Brazil’s wholesale CBDC. Previous announcements hinted at a rollout by the end of 2024, but the central bank is opting for a slow-and-steady approach to maintain the delicate balance of the financial ecosystem.
To this end, the central bank says it will take a moment to assess the results from the first phase of studies before proceeding with the next stage. However, the duration of the assessment remains unclear, with some eyeing a tentative launch date sometime in 2025.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
Watch: Deploying CBDCs on the original Bitcoin
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