Main challenges in developing CBDC

Banco Central do Brasil (BCB) has taken a bold step into the digital future, joining many global central banks seeking to modernize financial systems through digital currencies.

The Brazilian project, the central bank digital currency (CBDC) known as Drex, is emerging as part of a global trend toward digital innovation, but it also faces complex challenges related to privacy and legal compliance.

Main challenges in developing CBDC:

As it works to launch Drex, the Brazilian Central Bank faces a major hurdle related to ensuring strong data privacy, a vital issue that cannot be overlooked.

According to a June 6 report by the bank, current privacy-preserving technology is still not mature enough to meet all required legal privacy standards.

This dilemma is not unique to Brazil, as central banks around the world face similar challenges in striking a balance between maintaining user data confidentiality and ensuring transparent and secure transaction records.

The Brazilian Central Bank recognizes that failure to protect privacy could undermine public trust, which is a critical factor for widespread adoption of a central bank digital currency.

It shows Drex's reliance on Ethereum-based Hyperledger Besu technology.

The first phase of the pilot program focused on exploring the benefits of the Drex platform, which is designed to simulate operations using digital currencies.

The second phase seeks to test smart contracts developed and managed by external participants.

This step is crucial to strengthening the governance framework of the Drex ecosystem and ensuring the effectiveness of decentralized financial operations.

However, it poses additional challenges related to maintaining privacy and security.

Posted using Tribaldex Blog