State-owned Brazilian National Social Development Bank will issue a digital token designed to maintain parity with Brazilian real.
The Brazilian bank revealed that it will launch a pilot next month for the BNDES token, which is backed 1-for-1 by the national currency and runs on the Ethereum blockchain. Throughout the year, the bank has been experimenting with the stablecoin and will now utilize it for tax-deductible gifts to cultural institutions.
Ethereum design studio ConsenSys will be one of the firms consulting the bank throughout the process. Although the Brooklyn-headquartered conglomerate of startups has only confirmed its involvement in the Brazilian project, it falls squarely in line with the list of priorities mentioned in its founder Joe Lubin’s recent internal statement, saying the firm is renewing its focus on being a blockchain advisory specializing in token design and architecture.
For the pilot, several hundred dollars worth of BNDES will be issued by the bank to the National Film Agency to create and promote Brazilian movie productions and scripts.
Considering the bank’s history of alleged bribes and misallocated funds, the pilot creators are hoping the public BNDES blockchain data can help in restoring confidence in state-owned banks.
The trial will utilize the National Registry of Taxpayers’ electronic identification certificates, which Brazilian firms use as official registration documents.
“We can enforce rules using smart contracts. The company that receives the money can only spend it with companies that are working within the [film] sector,” BNDES systems development manager Vanessa Almeida said.
“We have a kind of ID in Brazil that has a certificate to send a token to the company, the company has to sign with this certificate…we will know in advance to which address you can send the tokens,” she added regarding the CPNJ identifiers.
With assistance from Ethereum Foundation developer Alex Van De Sande, the project seeks to enable filmmakers associated with the nonprofit Ancine to gather and share their financial data in real-time. Recipients can only redeem the stablecoin via the bank for local currency.
The transaction records may also be used to inform and develop future use cases. “This information can help guide public policies,” Almeida stated. “They will have a better map of this sector of the economy.”
So far, crypto traders have been the leading stablecoins users, keeping value in their exchange accounts which can be swapped for other digital currencies instantly without having to deal with banks.
In 2018, exchange firms such as Coinbase, Gemini, and Paxos added fiat-pegged coins. However, the Brazilian pilot displays a use case for fiat-pegged cryptocurrency beyond speculative markets.
According to Blockchain Academy founder Rosine Kadamani, the pilot could have ripple effects in Brazil.
“Because unfortunately, Brazil is very well-known for corruption, there’s a lot of questioning about the use of public funds,” Kadamani stated. “They start with a stablecoin that is basically an accounting control because everything goes back to the bank. But in the future, if it works well, there are other implications.”
The technical leader of the BNDES blockchain initiative, Gladstone Moises Arantes Jr, said the bank will reevaluate the pilot results and consider extending it to some organizations that get public funding.
“The concept we have could be used for other institutions in Brazil or the government as a whole,” he explained.