Pix, launched in November 2020, is Brazil’s most visible success in financial technology. Designed as a public, open instant payments platform, Pix quickly transformed Brazil’s payments landscape.
Its key benefits – instant transfers available 24/7, a broad range of use cases, low transaction costs, ease of use and high security – have driven widespread adoption among both consumers and businesses. Pix handles billions of transactions monthly, significantly reducing the reliance on cash and reaching previously underserved populations.
Looking ahead, Banco Central do Brasil believes that Pix may serve as a foundational infrastructure that could facilitate more complex financial arrangements, including settling transactions involving tokenised assets.
Taking innovation further
The success of Pix highlights the merit of digital public infrastructures, which, with an open architecture and inclusive design, level the playing field across industry participants. We took to heart this observation in deciding to initiate Drex.
Recognising the transformative potential of central bank digital currencies, we initiated a pilot to test Drex, our digital currency initiative. In its original design, Drex was conceived as a multi-asset, programmable distributed ledger technology platform.
The platform consisted of various layers. At the wholesale level, financial institutions would settle transactions exchanging central bank money, to which we refer as wholesale Drex. At the retail level, agents would hold tokenised bank deposits issued by financial institutions, which we call retail Drex. Transfers at the wholesale level would reflect the execution of smart contracts at the retail level.
This multi-layered architecture aimed at reconciling the benefits of financial intermediation with the efficiency gains promised by the programmability of settlement transactions.
Phase one: Addressing privacy concerns and ensuring public trust
To implement this vision, we initiated a pilot programme with two phases. The central focus of the first phase was addressing privacy, a must-have component for public trust and acceptance of digital currency. It involved intensive testing of advanced privacy technologies, including zero-knowledge proof, network segregation, confidential computing and various data obfuscation techniques.
We were interested in observing the performance of smart contracts and their composability, as well as the suitability of privacy tools to the Brazilian legal framework. Specifically, we simulated transactions between participants and their users involving three different assets (central bank money, tokenised bank deposits and treasury bonds).
One technology we considered was Anonymous Zether, a zero-knowledge proof technique that creates private versions of tokens. This technology was able to guarantee the privacy and anonymity of transactions for participants not involved in the transaction itself, but did not guarantee full disclosure to regulators and other authorities.
Another technology we considered was Rayls, developed by Parfin. This solution creates segregated ledgers based on the Ethereum Virtual Machine, which are interoperable through a common underlying communication layer. In this way, the tokens required to execute a contract on the segregated ledger are transferred and deposited within the ledger itself, ensuring that only the ledger owner has visibility into the operations performed. This solution was also successful in ensuring the anonymity of transactions. However, it presented serious scalability challenges.
We also considered other privacy solutions, such as Starlight, developed by EY. Our extensive evaluations showed significant promise in protecting privacy; however, in all cases, the system’s response time became longer, user experience got worse and programmability was impaired.
Our experience confirms what is often referred to as the ‘privacy trilemma’, a challenge in simultaneously achieving privacy, scalability and programmability within DLT. Despite technological advancements, tough trade-offs persist.
Phase two: Exploring business models and programmability
With these insights in mind, we moved into phase two, shifting our attention towards deepening our understanding of how financial markets could benefit from a DLT-enabled built-in programmability.
In Brazil, high borrowing costs and collateral constraints disproportionately affect small and medium-sized enterprises.
A case in point is that of bank-issued time deposits (CDBs). Currently, roughly a third of the total funding by Brazilian financial institutions takes the form of CDBs. Yet, there is no secondary market for these assets, which are typically not redeemable before maturity. As a result, if an investor wants to sell her CDB, she must negotiate a rate with the issuer, who then exerts monopsonistic power over the investor.
Current technical restrictions on the trading and collateralisation of bank-issued time deposits could be significantly eased through tokenisation, which greatly facilitates the integration with front-end applications.
This phase of the pilot – still being carried out – evaluates various use cases that enlarge the set of collateralisable assets, including CDBs, public debt, credit card receivables and debentures.
Early results already confirm the transformative potential of delivery versus payment with atomic settlement and programmability in streamlining complex financial transactions, lowering costs, reducing settlement risks and increasing market efficiency.
A strategy for the future
Combining the lessons learned from phases one and two, we devised a strategy with a short-term and a long-term dimension.
In the short term, we remain technology-agnostic, prioritising solutions that effectively address current market frictions using existing infrastructure. Rather than committing to widespread DLT adoption or full-scale CBDC implementation, our current approach seeks incremental improvements that leverage established financial market infrastructures.
The idea is to provide a bridge between current central bank settlement systems and specific token arrangements. Related examples that come to mind include the Banca d’Italia hash-time-locked contracts model and the trigger solution by the Deutsche Bundesbank.
Looking further ahead, we envision a scenario where tokenised asset arrangements increasingly become commonplace, including those arrangements that settle with fully backed stablecoins (and, thus, indirectly using central bank money). Within such an ecosystem, central banks will play essential role, acting as custodians of reserve backing of stablecoins, managing omnibus accounts or creating interoperability through bridges to real-time gross settlement systems.
If the current shortcomings of DLT and other emerging technologies are effectively addressed, central bank money itself could potentially be tokenised and integrated into distributed ledger environments. This possibility would entail even more significant efficiencies, programmability and market democratisation.
As time goes by, the challenge is to identify assets with privacy requirements that are compatible with available technology. As the technology frontier expands, it will become possible to privately trade more and more assets in a programmable ledger.
In the meantime, we need flexibility to be able to pivot to a DLT-based unified ledger when the time comes. For this future to become true, I believe that collaborative efforts by regulated entities and central banks are crucial.
In Brazil, we will insist on the same collaborative market-driven approach that made Pix a success. Collaboration across jurisdictions is also essential to share best practices and highlight common challenges. These interactions reinforce our belief that co-operation and continuous dialogue are vital for successful innovation.
Our journey with Pix and Drex has taught us critical lessons about managing innovation strategically and pragmatically. By balancing visionary goals with careful risk management and continuous market collaboration, we remain committed to exploring technology’s full potential to strengthen financial systems and benefit society at large.
Renato Gomes is Deputy Governor for Licensing and Resolution, Banco Central do Brasil.
This is an edited version of a speech given at OMFIF’s Digital money summit 2025. Read the full speech here.
Interested in this topic? Subscribe to OMFIF’s newsletter for more.