After a four-year testing program, the Central Bank (BC) from Brazil has decided to shut down its Drex platform next Monday (10) the real digital platform based on blockchain. The regulator told to companies tha tit will move toward creating an entirely new infrastructure. However, it did not guarantee that this new system would rely on blockchain technology.
The Drex plataform, based on Hyperledger Besu, reportedly failed to meet key requirements, particularly those concerning privacy and security for financial operations.
The regulator communicated the upcoming changes during a meeting hold last Tuesday (4) with the consortia that participated in the latest Drex pilots. The meeting was attended by the BC’s IT department, including auditor Clarissa Souza, who is linked to the technical area. Notably, the institution’s business area, which was heavily involved in the project, did not participate.
New proposal for Drex
The BC had already indicated its intention to drop blockchain for Phase 3 of the pilot last August to allow the technology to mature further.
With the decision to discontinue Drex, the Central Bank signaled a shift in its initial project order. The original Drex project began with the Lift Challenge program, focusing on identifying potential use cases. Only after the infrastructure was created did the two pilots proceed to test use cases, according to meeting participants.
The new proposal reverses this approach. The project will now start from scratch, first seeking viable use cases before defining the necessary infrastructure. These cases would involve areas such as Open Finance, Pix, and investments, according to one of the participants.
Lessons learned
André Carneiro, CEO of BBChain, commented that “Phase 2 of the Drex pilot served its purpose, as expected by the Central Bank. The technologies were evaluated from the regulator’s perspective and, according to their criteria, within a very broad and ambitious scope, they demonstrated the need for evolution to fully meet requirements.”
Carneiro added: “New business models with a scope more directly guided by the market can have their requirements met without the regulatory constraints of the Drex pilot. This unleashes the potential of DLT/Blockchain technologies, giving the market a greater role in this evolution.”
Drex lead to different decisions in Brazil
The Drex platform had significantly energized the financial and non-financial markets of Brazil due to its potential to facilitate the creation of new products and services through accelerated tokenization, aiming for greater efficiency and inclusion.
Following the announcement, some sector companies confirmed they would continue to invest in tokenization, citing lessons learned and benefits, but without relying on a settlement platform like Drex. The Pix system, the national instant payment system, could potentially become a path forward for them.
Others, however, chose to hit the brakes on blockchain and tokenization, instead allocating resources to other areas, such as Artificial Intelligence (AI). The cost of participation in the pilots was borne by the participating companies.
