Brazil Central Bank Announces CBDC Pilot With Visa and Mastercard

Brazil Moves Forward With Digital Real Pilot

The Banco Central do Brasil announced on February 4, 2026, that it will begin testing the Drex (digital real) with Visa and Mastercard as payment processing partners. The CBDC pilot program represents the most ambitious retail deployment of a central bank digital currency in Latin America, involving 16 commercial banks and approximately 50,000 merchant locations across Sao Paulo, Rio de Janeiro, and Brasilia.

The pilot is scheduled to run for six months, with results informing a decision on a broader national rollout expected in 2027. During the test phase, participating bank customers will be able to convert Brazilian reais into Drex tokens through their banking apps and spend them at merchants equipped with Visa or Mastercard contactless terminals.

Central bank governor Roberto Campos Neto described the pilot as a turning point for Brazil's financial infrastructure. The Drex builds on the success of Pix, Brazil's instant payment system that processed over 42 billion transactions in 2025. While Pix handles simple transfers, the Drex adds programmability, enabling conditional payments, automated tax collection, and tokenized asset settlement.

How the Visa and Mastercard Integration Works

The partnership with Visa and Mastercard solves a distribution challenge that has slowed other CBDC pilots worldwide. Rather than requiring merchants to install new payment terminals or adopt unfamiliar technology, the Drex plugs into existing card payment infrastructure. Merchants who already accept Visa or Mastercard contactless payments can accept Drex without any hardware changes.

From the consumer side, users access Drex through their bank's mobile app. The app generates a virtual payment credential linked to the user's Drex balance, which can be added to digital wallets on smartphones. At checkout, tapping a phone to a payment terminal triggers the Drex transaction, which settles on the central bank's blockchain within seconds.

Visa and Mastercard act as the message relay layer between the merchant terminal and the Drex settlement network. The card networks do not hold or transmit the actual Drex tokens. Instead, they translate the payment instruction from the terminal into a format the Drex blockchain can process. Settlement happens directly between the buyer's bank and the merchant's bank on the permissioned ledger.

Transaction fees for the pilot are set at 0.5 percent, lower than the typical 1.5 to 3 percent charged for credit card transactions in Brazil. The reduced fee structure is designed to encourage merchant participation and demonstrate the cost advantages of blockchain-based settlement.

Technical Architecture Behind the Drex

The Drex runs on Hyperledger Besu, an enterprise-grade blockchain platform compatible with the Ethereum Virtual Machine. The central bank chose Besu for its permissioned consensus model, which allows the monetary authority to control who operates validator nodes while maintaining the programmability of Ethereum-compatible smart contracts.

The network uses a proof-of-authority consensus mechanism, with validator nodes operated by the central bank and participating financial institutions. This design prioritizes transaction throughput and finality over the decentralization properties valued in public blockchains. The network can process approximately 1,500 transactions per second, sufficient for the pilot's scale.

Smart contract functionality is a core feature. The Drex supports programmable payments, meaning transactions can carry embedded conditions. For example, a government benefit payment could be programmed to only be spent at approved retailers, or a business escrow payment could release automatically when delivery confirmation is received. These capabilities go beyond what Pix or traditional bank transfers offer.

Privacy protections include a tiered system. Small transactions (under 1,000 reais) require minimal identity verification, while larger amounts trigger full KYC checks. The central bank has implemented zero-knowledge proofs for certain transaction types, allowing the system to verify compliance without exposing individual transaction details to all network participants.

Implications for Stablecoins and Private Crypto

Brazil is already one of the largest markets for stablecoin adoption in Latin America. USDC and USDT are widely used for cross-border remittances and as a hedge against real depreciation. The introduction of the Drex raises questions about whether a government-issued digital currency could displace private stablecoins for domestic use cases.

The Drex offers advantages that stablecoins cannot match: legal tender status, integration with the national banking system, and zero counterparty risk since it is backed by the full faith of the Brazilian government. For domestic payments, the Drex will likely be more convenient than stablecoins, which require blockchain wallets and carry exchange rate risk.

However, stablecoins serve different purposes. Dollar-denominated stablecoins provide a hedge against local currency volatility, a function the Drex cannot fulfill since it is pegged to the real. For international commerce and remittances, stablecoins still offer advantages in speed and cost compared to traditional cross-border payment channels.

The Brazilian central bank has not announced plans to restrict stablecoin usage. Instead, officials have indicated that the Drex and private stablecoins can coexist, with the CBDC handling domestic transactions and stablecoins continuing to serve cross-border and savings purposes.

Global CBDC Race and Brazil's Position

Brazil joins a growing list of countries moving from CBDC research to active testing. China's digital yuan remains the most deployed, with over 260 million individual wallets and cumulative transaction volume exceeding 7 trillion yuan ($960 billion). India's e-Rupee has reached 5 million users through a more cautious pilot. The European Central Bank is in a preparation phase for the digital euro, with a target launch window of 2027.

Brazil's approach stands out for two reasons. First, the Visa and Mastercard partnership gives the Drex immediate access to a vast merchant network, bypassing the adoption hurdle that has slowed other CBDCs. Second, the smart contract functionality makes the Drex one of the most technically ambitious CBDC projects, positioning it as a platform for programmable finance rather than just a digital payment method.

The Atlantic Council's CBDC tracker now counts 134 countries actively exploring central bank digital currencies, representing 98 percent of global GDP. Brazil's pilot will be closely watched as a model for how CBDCs can leverage existing payment infrastructure to achieve rapid adoption.

Privacy Concerns and Public Response

Privacy advocacy groups in Brazil have raised concerns about the surveillance potential of a central bank digital currency. Unlike cash transactions, every Drex payment creates a permanent record on the central bank's ledger. Critics argue that this level of financial transparency could be used for political monitoring or social control.

The central bank has responded with several privacy-preserving measures. The tiered verification system limits data collection for small transactions. Zero-knowledge proofs shield individual transaction details from commercial bank participants. And the central bank has published a data governance framework specifying that Drex transaction data cannot be shared with law enforcement without a court order.

Public opinion surveys conducted in January 2026 show mixed sentiment. Approximately 62 percent of Brazilian adults said they would try the Drex if offered by their bank, while 28 percent expressed privacy concerns. Younger demographics (18 to 34) showed the strongest interest at 74 percent, likely influenced by familiarity with digital payment tools through Pix and cryptocurrency apps.

Business groups have generally welcomed the pilot. The Federation of Brazilian Banks (FEBRABAN) called the Drex a natural evolution of Brazil's payment infrastructure and praised the low transaction fees. Smaller merchants, who bear the highest costs from card processing fees, see the Drex as a way to reduce payment expenses and improve cash flow through faster settlement.