Brazilian Drex CBDC Abandons Blockchain for 2026 Launch

The Brazilian central bank has confirmed that its digital currency initiative, known as Drex, will pivot away from blockchain technology for an initial launch by 2026, in response to delays and technical limitations in achieving sufficient privacy standards [1]. The decision comes after repeated challenges in developing privacy solutions that can meet the security and secrecy requirements of the Brazilian financial system [1]. Fabio Araujo, coordinator of the Drex project, stated that the project will be delivered in two phases, with the first phase focusing on a centralized model that excludes decentralized elements [1]. The second phase, to be developed in the future, will aim to incorporate blockchain and tokenization technologies once they have matured [1].

This shift marks a significant departure from the original design of Drex, which was intended to operate on a permissioned blockchain compatible with Ethereum and utilize tokenization for various financial use cases [1]. The central bank had previously selected Hyperledger Besu, an open-source Ethereum-compatible platform, for its CBDC project in 2023 [1]. However, the ongoing uncertainty surrounding the project’s continued use of this platform highlights the evolving technical and strategic direction of the initiative [1].

Araujo emphasized that while several privacy solutions have been tested, they still lack the robustness necessary to secure the financial system. “We find good privacy solutions, but apparently they’re not enough. We need to put this to the test,” he said in an interview with Valor Economico [1]. The lack of programmability in a centralized model also limits the potential for many of the advanced financial applications that had been explored during earlier pilot phases [1]. Nevertheless, the centralized version is expected to enable credit operations involving multiple types of collateral, although the specific tools for this functionality have yet to be disclosed [1].

The decision to delay the integration of blockchain elements reflects a strategic compromise between innovation and operational feasibility. By prioritizing a functional launch over technological experimentation, the central bank aims to deliver a stable and secure digital currency framework that aligns with national financial regulations and infrastructure capabilities [1]. The revised timeline also indicates the central bank's intention to maintain a pragmatic approach, adapting its strategy as needed based on technological advancements and regulatory feedback.

This development follows earlier setbacks in the Drex project, including the postponement of the pilot program to 2025 due to inefficiencies in privacy solutions [1]. While the centralized model may not offer the full range of functionalities associated with decentralized technologies, it represents a necessary step toward achieving a viable CBDC solution in the near term. The central bank’s long-term vision still includes the potential integration of blockchain once its privacy and scalability challenges are sufficiently addressed [1].

Source: [1] Brazilian Drex CBDC Drops Blockchain to Launch Next Year (https://api.news.bitcoin.com/wp-json/bcn/v1/post?slug=brazilian-drex-cbdc-drops-blockchain-to-launch-next-year)