Showing posts with label Brazil. Show all posts
Showing posts with label Brazil. Show all posts

November 13, 2017

'Immature' no longer: Brazil's Central Bank is ramping up its Blockchain work

By Michael del Castillo - November 13, 2017 (

The Central Bank of Brazil is building with just about every blockchain it can get its hands on.

In a new interview about its plans for the nascent technology, members of the central bank's blockchain team revealed they are resuming work with R3's Corda distributed ledger platform, months after ceasing development because the technology was deemed too "immature."

After the enterprise blockchain consortium launched version 1.0 of Corda in October, the central bank said it's ready to see if the newest version has what it takes to back up aspects of the country's financial infrastructure.

And with that, Banco Central do Brasil is now developing proofs-of-concept (PoCs) on four different platforms, trialing ethereum, JPMorgan's Quorum and Hyperledger Fabric alongside its Corda work.

The PoCs broadly focus on using blockchain to both back-up the central bank's current real-time gross settlement system (RTGS), called the Brazilian Payment System, as well as better align the organization with the growing momentum for central banks to innovate using blockchain technology.

Speaking to that trend, the deputy head of the central bank's IT department, Aristides Andrade Cavalcante Neto, told CoinDesk:

"We are a central bank, and we enjoy a lot of stability. But you have to think change. You have to think in a different business model. So, for us, that's the most difficult part of this kind of work when we're talking about innovation."

Real-time blockchain

While the blockchain team at Brazil's central bank had considered a number of use cases – including enabling foreign trade in local currencies and an identity management system – as far back as January, it ultimately selected RTGS as its focus, according to the team's analyst Jose Deodoro De Oliveira Filho.

Instead of being netted periodically, RTGS is used to allow banks to settle their large-value debits immediately as they occur. Because these transactions are relatively infrequent, they have been identified by multiple central banks as a potential use case for blockchain.

Banco Central do Brasil processes 314,ooo transactions per day, moving a total of 839 billion Brazilian reals, or about $255 billion by today's exchange rate.

Talking to CoinDesk, De Oliveira elaborated on the decision to focus on the RTGS use case, stating that while the central bank's current system has been helping commercial banks reconcile accounts for 15 years, they still don't have a backup system. And they're interested in whether a blockchain it suitable for the job.

According to De Oliveira, each of the platforms has its own "advantages and problems," but really only two main obstacles – albeit big ones – remain.

Specifically, the central bank can't "prove" that implementing a blockchain system would be cheaper than implementing something more traditional, he said. And there are ongoing questions about the privacy of using a shared, distributed ledger.

"If you want privacy you can't have the other features, and if you want the other features, you can't have privacy. So, that's what we're trying to solve right now," De Oliveira said.

Out in the open

But while RTGS is the primary focus of the central bank's blockchain work, it's also testing a blockchain-based "information exchange."

Revealed for the first time to CoinDesk, the exchange, called Know Your Citizen (seemingly a play on the regulator-mandated know-your-customer compliance), is powered by Quorom in Microsoft's Azure cloud. It also uses Truffle, a popular ethereum development framework, to interact with smart contracts.

Details about the project are "kind of a secret right now," according to De Oliveira, but he said more information should be forthcoming in the "next couple of months."

Elsewhere, the central bank is increasingly open regarding its blockchain development.

Not only did it introduce its findings at the Central Bank Summit hosted by Ripple in New York last month, but also it has also presented its work to the International Monetary Fund, and will, later this month, appear at Blockchain Summit 2017 in Sao Paulo, Brazil.

As other central banks from all around the world, including Hong Kong, Japan, Canada and Europe, are typically in attendance at these events, Cavalcante Neto framed this openness as a way to workshop ideas with peers, saying:

"It's very useful, this kind of meeting, to understand the different perspectives from different central banks about the technology."

Brazilian real image via Shutterstock.

October 21, 2017

Clueless central bankers regard Bitcoin with envy & hatred

By Daniel Duarte - October 21, 2017 (

In my first article for the Cointelegraph I tried to explain the value of Bitcoin to citizens of countries that practice capital controls, which are usually countries with less economic development.

A day later, I read an article where the president of the Central Bank of Brazil exposes his lack of understanding and appreciation about digital currency, which could be such a boon to citizens of my native country, Brazil.

I believe that the best way to explain it is through practical examples, so I will summarize my experience with the legal tender currency of my country.

I was born in 1981, during the decade of hyperinflation in Brazil, I remember that it was normal to see the supermarkets crowded during the first week of the month. This is because on payday, everybody groceries for the entire month since prices were changed every day, sometimes more than once a day.

Our money lost value every minute, while the government's printing machine worked at a frenetic pace.

During more than 10 years of hyperinflation, several leaders sitting in the chair of the Finance Minister or the President of the Central Bank tried to reduce or minimize inflation. They didn’t do it the hard way, and the way that might have worked, by cutting government spending. Instead, these men had pipe dreams, coming up with economic plans they thought were most miraculous.

One of these pie-in-the-sky plans definitively marked the Brazilian people. During the government of President Fernando Collor, the Minister of Finance, Zelia Cardoso de Mello, confiscated all the money that Brazilians kept in banks. The idea was simple: without money there would be no demand for products, so inflation would be controlled.

Obviously this didn’t work to save the economy, but it did devastate many Brazilians. Some, like my grandfather, relied on their life savings to pay for their medical care. These people were badly hurt.

What does history teach us?

First of all, a deflationary currency such as Bitcoin, whose economic model is based on that of thinkers like Frederich Hayek, is valuable to all citizens of countries that fear of inflation.

Second, inhabitants of countries that have already experienced economic chaos know how valuable it is to have assets that cannot be confiscated overnight. Today we have examples such as Venezuela, and a few years ago, Argentina.

There is a popular saying in Brazil that a dog that has been bitten by a snake is afraid of a sausage. In America, you might say “once bitten, twice shy.” Those who have lived through hyperinflation can really understand the value of a deflationary currency.

That's why we love Bitcoin, and why most of the central bankers hate it. Deep down they are envious, even fearful, of Bitcoin’s economic model. Bitcoin has achieved what is impossible for them, the creation of the first truly deflationary currency that’s free from the mismanagement of governments.