Drex second phase of pilot launch, focusing on trade finance innovation

The Central Bank of Brazil (Banco Central do Brasil, BCB) recently announced the launch of the second phase of its Central Bank Digital Currency (CBDC) pilot project Drex, aiming to improve cross-border agricultural product transactions and supply chain processes. This phase focuses on using oracle and blockchain technology to establish a trade finance solution. The project brings together companies such as Microsoft, Chainlink, Banco Inter, and 7COMm to explore automated trade settlement methods.

As a decentralized oracle service provider, Chainlink will provide its Cross-Chain Interoperability Protocol (CCIP) to the pilot to facilitate secure cross-platform transactions, and achieve a Delivery versus Payment (DvP) mechanism based on blockchain to enhance transparency and efficiency.

Using Blockchain technology to solve global trade finance efficiency problems

The second phase of the Drex pilot will utilize blockchain technology to address the inefficiencies in global trade finance. The project will involve the tokenization of electronic bills of lading (eBOL), as well as Block mechanisms such as DV and payment versus payment (PvP). DV refers to the transfer of assets only after payment confirmation, while PvP involves simultaneous Settlement between different currencies.

These technologies will be tested to automate supply chain payments and enhance cross-platform and cross-currency compatibility. The pilot aims to integrate CBDC and Blockchain technology into the Brazilian economy to address inefficiencies in trade finance and promote financial innovation.

Collaborating to promote the application and market expansion of CBDC in the longer term

Brazilian digital bank Banco Inter will lead the implementation of the Drex platform in the country, seeing the plan as an opportunity to expand the market and strengthen the economy, according to Bruno Grossi, Banco Inter's emerging technology director, in an interview with Cointelegraph.

"We will collaborate with Microsoft and chainlink Labs and other technology leaders, this is a transformative opportunity to expand market coverage and improve the health of the Brazilian market."

Microsoft will provide the necessary cloud-based infrastructure to support the technical requirements; 7COMm will be responsible for the technical expertise in blockchain integration. Chainlink's CCIP infrastructure will facilitate the cross-chain interaction transfer between Drex and other CBDCs.

Solving the 'trilemma' of Decentralization, privacy, and programmability

The pilot project focuses on solving the "three difficult problems" of Decentralization, privacy, and programmability, aiming to incorporate tokenization into the balance sheet of the banking sector. The second phase of the Drex pilot will continue until 2025, exploring digital asset transactions, including the liquidity pool of government bonds and international trade.

In addition to government initiatives, companies like Ripple are also expanding cross-border encryption payment options in Brazil and have previously announced partnerships with Brazil's Mercado Bitcoin exchange. Angela Walker, Global Head of Banking and Capital Markets at Chainlink, said that the pilot will demonstrate how tokenized assets unlock new CBDC applications in Brazil and change the trade finance industry.

She added: "Chainlink's CCIP is crucial for achieving secure cross-border, cross-currency, and cross-chain interaction transactions, and will help demonstrate the large-scale application of tokenization assets in key CBDC applications in Brazil."

The second phase of the Brazilian CBDC trial has started! How does Drex achieve new breakthroughs in cross-border transactions? This article was first published in 'encryption city'.