Brazil's central bank (BCB) announced the selection of 13 participants for the second phase of its central bank digital currency (CBDC) initiative. This phase, referred to as Drex, saw 42 proposals submitted to both the BCB and Brazil's Securities and Exchange Commission (CVM).

The BCB will oversee 11 of these projects, while the CVM will supervise two. According to the BCB, the second phase will involve testing the infrastructure developed for the pilot by implementing financial services through smart contracts managed by various third-party participants on the platform. Notable participants include Visa, which will collaborate with Brazilian brokerage XP and digital bank Nubank to enhance the foreign exchange market.

Additionally, Santander has been selected to work on projects related to automobile transactions and lending, as well as decarbonization efforts. The BCB has indicated that it will issue a new call for participation in the Drex pilot in the third quarter of 2024. This upcoming phase aims to test the implementation of smart contracts by mid-2025.

Other significant local financial institutions such as Bradesco, Itaú Unibanco, and the stock exchange B3 will also be involved in this phase. The first phase of the digital real pilot The first phase of the digital real pilot, which began in May 2023, included 14 participants. Participants were chosen from a pool of 36 bids made by single companies and consortia.

While the final number of participants ended up being 14, some participants represented groups of companies, including Microsoft and digital technology company 7COMm. Visa, Santander, and several Brazilian banking institutions took part the pilot programme. The initial phase focused on testing the privacy and programmability functionalities of the platform through a single use case, namely a delivery versus payment protocol for federal public securities.

According to thecoinrepublic.com, the CBDC will become available for public use by the end of 2024 because the project will need to go through an extensive testing phase that will involve the buying and selling of federal public bonds among individuals. The digital real will leverage distributed ledger technology (DLT) and will be fully supported by the Central Bank of Brazil and the Brazilian Monetary Authority. Furthermore, the CBDC will represent of extension of traditional currency and will have the same value as traditional real.

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