Brazilian State Bank to Tokenize Brazilian Real on Ethereum’s Public Blockchain
The Brazilian National Bank for Economic and Social Development (BNDES) is tokenizing the country’s national currency through ethereum’s public blockchain to increase transparency.
“Any Brazilian can see the companies involved in the transaction and the transactions carried out. Critical information will not be stored in a database within BNDES. They will be public in the blockchain,” Suzana Maranhão, a member of the BNDES Token Team, says according to a rough translation.
Borrowers from the State Development Bank and those given grants will receive ERC20 Ethereum tokens called BNDES Token, each fixed at the value of 1 real. With the tokens being redeemable at will at the state bank.
“There is an opportunity cost between receipt and redemption, but we are estimating that this cost will be less than the current cost between request for release, verification of conditions for release and transfer to the customer with subsequent payment to the supplier,” Vanessa Almeida, a BNDES systems development manager, told local media before adding:
“In addition, the release into tokens will facilitate the accountability of clients to the BNDES, which may more than offset this cost. All this needs to be measured with real data, so it is so important to make a proof of concept with customers who see value in the proposal, as has been the case of Espírito Santo,” a southeastern Brazilian state.
This is a proof of concept project lasting until May this year arising from an internal bank innovation contest held in 2017, which had 335 ideas presented.
The suggestion seems to be that instead of handing out cash to suppliers which you can not track, or handing over fiat through banks which the public can not validate, they are given tokenized money through the public blockchain. Allowing anyone to see how it was spent.
“BNDES is the target of criticism and mistrust not only of the press, but of society in general. Have you thought if it was possible to prove fully that no BNDES resource was left in the hand of money launderers or that no BNDES resource left Brazil and went to Cuba,” rhetorically asked Gladstone Arantes Jr from the bank.
There are a number of projects that use ethereum’s public blockchain for record keeping, including the Canadian government which is trialing it for contractors.
But this is the only one of its kind, as far as we are aware, that goes a step further to tokenize the funds themselves and hand over Brazilian Real tokens.
How those tokens would then be spent by contractors remains unclear, but as they are in effect blockchenized R$, one can’t see much reason why they wouldn’t easily be accepted.
Although the grant receiver of the tokens can of course just redeem them, with this acting in effect as a stronger public proof of the amount paid and to who. Far stronger than simply just a record entry like the Canadian government’s approach.
One can further see this as developing in a way where legitimate businesses can just accept the token directly for payment, while nefarious entities would probably not want to risk the redemption process.
For now, we have to see how it all develops as it is very much at an inception stage, but the indisputable and immutable blockchain proof should increase transparency and perhaps trust in public spending entities and charities.