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Why Mercado Bitcoin and Stellar will explore the Brazilian CBDC

Why Mercado Bitcoin and Stellar will explore the Brazilian CBDC

According to a press release, Stellar Development Foundation (SDF) will partner with major exchange Mercado Bitcoin. The partners will work on the nine cases of the LIFT Challenge of the Central Bank of Brazil (Bacen).

Related Reading | Nigeria to upgrade CBDC for wider use as crypto restrictions cripple fintech sector

The initiative was developed in partnership with other Brazilian institutions. Its objective is to explore the launch and use cases of a central bank digital currency (CBDC).

Stellar Development Foundation will work with Mercado Bitcoin, ClearSale and CPQD. These partners formed a LIFT Challenge consortium.

According to the release, the Real Digital Challenge (LIFT) Challenge Financial and Technological Innovations Laboratory operates as a collaborative environment to develop Real Digital, Brazil’s CBDC.

The project will identify the technological feasibility, the use cases and the necessary infrastructure to launch Real Digital. The initiative also aims to improve the Brazilian financial system by attracting market players, banks, payment institutions, technology companies and others.

These entities will be in charge of developing products with Real Digital as a base. The Central Bank of Brazil says that its CBDC will be implemented in the second half of 2022 with a first phase “piloted for a limited audience”, according to the statement.

Reinaldo Rabelo, CEO of Mercado Bitcoin, had this to say about the initiative:

We are part of a consortium of companies that have the structure and ambition to build robust solutions for the financial market using blockchain technology. The use of the Stellar network will allow us to provide a complete file for evaluation by the Central Bank.

The SDF has been working with the Ukrainian government on its CBDC for several years. The nonprofit and its partners were determined to test the programmable capabilities of the CBDC, but there has been a lack of updates on the project.

Why did Mercado Bitcoin choose Stellar as a partner?

Like Ukraine’s CBDC, Real Digital will be launched to promote innovation in payments and make Brazil’s financial system more open and inclusive. Denelle Dixon, CEO of the Stellar Development Foundation, stated that the cooperation with Mercado Bitcoin will help the network grow.

She added:

The Stellar network is ready to support Mercado Bitcoin and the Central Bank of Brazil as they explore use cases for the future of Real Digital. Stellar was built for asset issuance, and its built-in compliance tools give Mercado Bitcoin a solid foundation to build a solution with the features Bacen expects to see.

Mercado Bitcoin selected the Stellar network for its capabilities and because it believes it is “excellent for implementing tokenization and payment projects.” The network is capable of processing fast and low-cost transactions, allows financial institutions to implement their own KYC policies, is said not to be “power hungry”, and more.

Related Reading | SWIFT tests CBDC interoperability to enable cross-border payments

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