BRAZIL Trends and Developments Contributed by: Thomas Gibello Gatti Magalhães, André Dágola Brostoline and Luisa Grespan Danhoni Neves, Magalhães & Zettel
cial institutions that are already regulated and in operation to act as VASPs, provided that they are previously authorised by BCB to carry out these activities, which is the case for the integra - tion of the crypto-economy into the traditional financial system. Therefore, with the designation of BCB as the regulator of VASPs, the regulation process fol - lows, with market participation, as is the prac - tice of the Brazilian regulator, which has already carried out a public consultation, which aimed to collect data on technical elements and will be the basis for the construction of a regula - tion containing the best market practices and aiming for the stability of the Brazilian financial system. BCB is currently analysing the result of this public consultation, and intends to forward the normative act proposals in 2024. Following these crypto developments, BCB has advanced the establishment of a central bank digital currency (CBDC) since August 2020, with the potential to improve the efficiency of the retail payment market and to promote com - petition and financial inclusion for the population still inadequately served by banking services. In Brazil, this CBDC already has a name: DREX (Digital Real). DREX will be issued as a traditional fiat currency (ie, in the Brazilian case, only by BCB) and may be operated within a multi-asset Distributed Ledger Technology (DLT) ecosystem, where transactions will be carried out with digi - tal assets (“tokenised”) settled in wholesale with DREX issued by BCB (DREX Platform). Since March 2023, BCB has been conduct - ing the DREX Pilot, which is the testing phase for Brazilian CBDC transactions. At this stage, BCB is directly assessing the DREX Platform. More than 100 institutions from various financial sectors are participating in the DREX Pilot, in
addition to the National Treasury Office (STN) of Brazil, which is the body that issues government bonds. At this stage of the DREX Pilot, BCB has indicat - ed that “privacy and programmability features will be tested through the implementation of a specific use case – a delivery-versus-payment (DvP) protocol of a federal government bond between customers of different institutions, in addition to the services that make up this trans - action”. Currently, the DREX Pilot is still running, and both BCB and the participating institutions are conducting simulated transactions and trans - fers, both wholesale and retail, buying and sell - ing government bonds and executing smart contracts. In mid-October 2024, BCB opened a period for the submission of proposals from those interest - ed in carrying out the tests of the second phase, the DREX test focusing on business simulations for the implementation of smart contracts on the pilot platform, the simulation of issuance, redemption or asset transfer transactions, as well as the simulation of financial flows resulting from negotiation events with the Brazilian CBDC. However, all tests are still in a controlled and simulated environment within the DREX Pilot, and BCB has not yet set a date for DREX’s actual implementation. Online betting in the financial market Among the specificities of the Brazilian market, the country is currently being flooded with online bookmakers, known as “Bets”. It is important to note that gambling, such as casinos, has been prohibited in Brazil, since 1946, with legislative efforts to change this reality so far having no effect. However, in December 2018, Law No
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