Brazil central bank says digital currency pilot faces hurdles, timeline uncertain

Brazil's central bank said on Wednesday that the pilot project for its digital currency, called Drex, has faced technological challenges that require increased oversight, suggesting a longer timeline for its rollout. Initially planned for late 2024, Drex is a priority in the central bank's tech agenda following the striking success of its instant payment system, Pix. However, the timeline had already been pushed back, with former central bank governor Roberto Campos Neto, a strong advocate of the project, estimating in October that Drex would take two more years to launch. The Brazilian central bank digital currency aims to use distributed ledger technology (DLT) for wholesale interbank transactions. Retail access is expected to rely on tokenized bank deposits. The goal is to simplify and secure access to registered assets via DLT, lowering costs and expanding credit, investment, and insurance services. In a statement, the central bank said that, contrary to its initial plan, the second phase of testing would not include new business use cases beyond those already being tested in the pilot - wholesale Drex, retail Drex, and tokenized federal government bonds. The bank added that the second phase would take longer than expected due to limitations in tested solutions. It did not commit to a new deadline. "The pilot has proven technologically challenging and is requiring more intensive oversight in its second phase than initially expected," it said in the statement. "A significant adaptation effort will likely be needed for the Drex platform to serve as infrastructure for innovative services benefiting society," the bank added in a separate report on the matter. The central bank said that it would only move forward with solutions that can ensure privacy, data protection, and transaction security, emphasizing that next steps would depend on the results achieved in the second phase.