The Brazil Central Bank Taps Chainlink in New CBDC Trade Settlement Program

Brazil’s central bank, Banco Central do Brasil (BCB), has tapped crypto project Chainlink in its latest push to use CBDC to foster international transactions.

The partnership also involves major firms like Microsoft, the Hong Kong Monetary Authority (HKMA), Banco Inter, and 7COMm. Notably, it aims to enhance Brazil’s central bank digital currency (CBDC) to facilitate swift cross-border transactions.

Brazil Launches Phase 2 of Its CBDC Pilot Program

BCB’s Drex pilot program has entered its second phase, tapping key players in each sector to automate supply chain management and enhance cross-border transfers. The Brazilian Central Bank sees the pilot as an avenue to leverage blockchain technology to address the country’s inefficiencies in international trade settlements.

Per the release, the BCB tapped Chainlink to provide Cross-Chain Interoperability Protocol (CCIP) to establish synergy between the bank and the central banks of other countries for cross-border transactions. Chainlink intends to provide this feature by tokenizing an Electric Bill of Lading (eBoL) on the blockchain and using it to make on-chain settlements for purchased commodities.

Chainlink will also provide Delivery versus Payment (DvP) and Payment versus Payment (PvP) options. The DvP transaction settlement allows commodity delivery only after payment confirmation, while PvP ensures payments across countries.

Strategic Partnership to Boost Brazil’s Economic Health

Digital bank Banco Inter, which has over 31 million users, will drive the adoption of the blockchain technology. Reacting to the announcement, the firm’s head of emerging technologies, Bruno Grossi, stated that the collaboration is an “exciting moment for Brazil.”

Grossi insisted that the collaboration with Microsoft and Chainlink is a transformative opportunity for Brazil, which looks to leverage blockchain technology to expand its market coverage. He noted that the Brazil-based firm is excited about the opportunity and anticipates an innovative endgame.

Microsoft expressed confidence in the collaboration’s ability to boost Brazil’s economy. The software firm noted it would provide the technology needed to push the Drex pilot to fruition.

Meanwhile, Chainlink would face serious contentions in its CBDC venture as Ripple is a notable name in the sector. Notably, Ripple announced earlier in the year that it is collaborating with ten governments on the CBDC initiatives.