Brazil's central bank is pushing ahead with its central bank digital currency (CBDC) project, Drex, but has decided to drop blockchain and tokenization elements to ensure a launch by 2026. According to local media reports, the revised Drex will adopt a centralized architecture and be delivered in two phases.
Why Blockchain Was Abandoned
Fabio Araujo, coordinator of the Drex project at the central bank, confirmed the major shift to Valor Economico. In the first phase, Drex will have no decentralized aspect and is expected to launch in 2026. The second phase will continue to develop and mature blockchain technologies. The privacy solutions tested so far, while promising, have not yet met the bank-level confidentiality and verifiability standards required by Brazil's financial system.
Privacy has been a key roadblock for Drex's decentralized ambitions. Last year, the central bank postponed the pilot due to insufficient privacy solutions. Araujo stated, "We found good privacy solutions, but apparently they’re not enough. We need to put this to the test."
Technical Changes
The centralized Drex will lack programmability, meaning many use cases tested during the pilot's two phases cannot be implemented. Furthermore, it is unclear whether Hyperledger Besu (the open-source, Ethereum-compatible permissioned blockchain platform chosen in 2023) will continue to be used. The centralized version will offer a lien reconciliation solution, enabling credit operations with various types of collateral, though the tools for this functionality have not yet been announced.
Outlook
Brazil's decision highlights the real-world challenge in CBDC development: balancing privacy with decentralization. While the centralized approach sacrifices some blockchain benefits, it could bring digital fiat convenience to Brazil's financial markets sooner. Whether the second phase will reintroduce blockchain, and the fate of Hyperledger Besu, remain to be seen.