Brazil’s central bank has released a new research paper that details possible use cases for blockchains and distributed ledgers while outlining how various available platforms could be used to test the technology.
The result of a study group initiated by Banco Central do Brasil and published August 28, the report looks at use cases for DLT including identity, local currency and settlement – though, just the latter was ultimately recommended for prototyping.
The objective, however, is not to design a primary settlement platform for the central bank, but to create a “minimal” backup system for funds transfer in the event of a “complete main [settlement system] meltdown.”
The report states:
“In the case of its catastrophic failure, RTGS members would be unable to send (or receive) funds to (from) each other, leading to a complete financial halt. … In this context, the Alternative System for Transactions Settlement (SALT) is a conceptual system for a contingent solution that would be able to immediately replace core functionalities of the main Brazilian RTGS in case of its full collapse.”
The authors indicate that the design of this system includes a permissioned blockchain network in which financial institutions and the central bank itself are the validating nodes.
They study concludes that, although privacy is a potential issue, DLT “could make possible to create a unique shared view of a large variety of information fed and replicated across institutions.”
In this way, the paper is in line with studies commissioned by other global central banks.
The Bank of England and the Monetary Authority of Singapore, for example, have examined how blockchain could be applied to settlement, though the UK central bank has perhaps gone the farthest to date, reporting its newest settlement system will be “distributed ledger compatible.”
Brazilian currency image via Shutterstock
The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at [email protected].