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(Kitco News) - The Central Bank of Brazil (BC) has issued a call for firms interested in participating in the pilot project for its central bank digital currency (CBDC), the digital real, to register to take part in the upcoming trial.
The application window for the trial opened on May 2, and interested parties have until May 12 to submit their proposals for participation. Only institutions that are authorized to operate by the BC and have the ability to test issuance transactions, redeem or transfer financial assets, and “perform the simulation of financial flows resulting from trading events” are invited to participate in the trial.
The pilot program for the digital real was officially launched in March and includes a testing phase that involves the buying and selling of federal public bonds among individuals.
As part of the preparation for the pilot program, the BC has established a set of rules and procedures that project participants will need to abide by, and created the Executive Management Committee (CEG), which will manage the governance and execution of the pilot project.
“CEG will coordinate the development of the testing platform, that is, the internal efforts and the participants selected for the RD Pilot,” said Fabio Araujo, coordinator of the Real Digital Initiative. “Pilot RD performs tests strictly necessary to ensure the security and privacy of users' data in simulated transactions on the Real Digital platform.”
There will be a limit of 10 entities participating in the pilot, the BC said, but if demand is sufficient enough and the CEG deems it feasible, “the number of participants may be increased by up to 100%.”
“Given the complexity of this environment, it is very important to have well-defined and transparent rules and procedures,” said Bruno Batavia, a member of the Department of the Circulating Environment. “Thus, all participants will be able to seek to achieve the objectives of the RD Pilot working cooperatively under the coordination of the CEG.”
According to the established regulations, entities wishing to participate in the trial must satisfy the following selection criteria: “Mandatory participation in the National Financial System Network; the types of transactions to be simulated must fall under their business model; they have a history or technological implementations carried out in the National Financial System; and they have experience with distributed ledger technology and the Ethereum Virtual Machine.”
The BC will strive to have a diversified pool of participants, and the final list will take into account the type of institution – such as a commercial bank, investment bank, cooperative, payment institution, financial market infrastructure, or credit fintech – the firm's “prudential segment,” and the types of transactions that they propose to simulate.
Entities that are selected to participate in the pilot will be responsible for bearing any expenses and costs associated with the trial, and each participant will be required to designate a technical representative “to manage their technical team and conduct the necessary understandings for the development of the RD Pilot with the BC and the other participants.”
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The BC plans to create a “Real Digital Forum” where participants can exchange information and receive guidance on “expectations regarding the development of this platform and the tests proposed during the RD Pilot.” Participants will also be able to use the communication channel to “discuss the establishment of business and development strategies that are more appropriate to the needs of the Brazilian society.”
Brazil has been one of the more open jurisdictions to blockchain technology and cryptocurrencies in recent years. In November, the country’s lawmakers approved a cryptocurrency framework bill that allowed Brazilians to use Bitcoin for payments and recognized digital assets as an investment class.
That same month, Tether, the company responsible for minting the Tether (USDT), integrated the stablecoin into 24,000 ATMs across Brazil through a partnership with the Brazilian crypto services provider SmartPay, enabling the conversion of USDT to Brazilian reais.
