Brazil’s Central Bank Drops Blockchain from Digital Currency Project
Brazil’s central bank is stepping back from blockchain technology in its digital currency project, Drex. The decision, announced at the Blockchain Rio conference last week, marks a sharp turn for what was once seen as a major step toward modernizing the country’s financial system.
Fabio Araujo, Drex’s coordinator, told *Valor* that scaling and privacy issues forced the change. Instead of pushing forward with blockchain, the project will now focus on simplifying collateral management and credit guarantees, aiming for a public rollout by 2026. Araujo didn’t completely rule out blockchain in the future—just not right now.
From Big Plans to Reality Check
Drex started in 2021 as the Digital Real, inspired by a Swiss academic paper on blockchain’s potential in mainstream finance. The original vision was ambitious: a two-tier system combining wholesale transactions for banks and tokenized deposits for everyday users. The idea was to create an entire ecosystem—not just a digital currency—where smart contracts and tokenized assets could unlock new financial services.
Built on Hyperledger Besu, Drex was designed to be compatible with Ethereum’s programming environment, which could have allowed DeFi-like applications within a regulated framework. It was even supposed to integrate with Brazil’s popular Pix payment system, acting as a kind of financial “super app.”
But then reality set in.
The “Drex Trilemma”
By 2023, pilot testing was underway with major banks and tech firms like Itau, Santander, and Microsoft. Early trials focused on tokenizing government debt and trade finance. But the project quickly hit what insiders called the “Drex Trilemma”—balancing privacy, scalability, and programmability in a permissioned blockchain.
Brazil’s strict data protection laws made privacy a non-negotiable, yet regulators needed full visibility. Several privacy solutions were tested, including tools from JPMorgan and EY, but none were cost-effective or reliable enough for large-scale use.
Then came other complications: a $200 million hack of central bank reserves last July, a change in leadership, and the U.S.’s hands-off approach to CBDCs. By early 2025, the new central bank president, Gabriel Galipolo, was already downplaying Drex’s blockchain angle, framing it as a financial infrastructure project rather than a tech experiment.
Mixed Reactions from the Industry
The decision to drop blockchain hasn’t gone over well with everyone. Some, like ABToken’s Regina Pedrosa, called it “surprising” and hoped for a reconsideration. Others were harsher. One unnamed executive accused the central bank of wasting time and money, saying Brazil’s financial sector had been dragged into a “wild goose chase.”
Marcos Sarres of GoLedger argued the issue wasn’t blockchain itself but the choice of Hyperledger Besu—alternatives like Fabric might have worked better.
Still, there’s a silver lining. Even if Drex’s blockchain phase is over, the project forced Brazil’s financial sector to seriously explore tokenization. Without the central bank’s push, the country might still be years behind in the conversation. Now, the question is whether a stripped-down Drex can still deliver on its promises—just without the buzzword-heavy tech.
