A state-owned bank in Brazil is about to issue a cryptographic token designed to maintain parity with the national currency.
Revealed exclusively for CoinDesk, the Brazilian National Social Development Bank will launch a pilot project in January 2019 for the BNDES token, which runs on the blockchain ethereum and is supported 1 by 1 by the Brazilian real. The bank has experimented with the stablecoin throughout 2018 and will now use it for tax-deductible contributions to cultural institutions.
ConsenSys, the design ethereum study, will be among the companies that consult the bank during this process. Although the Brooklyn-based start-up conglomerate, based in the north-west, has not commented on this Brazilian project as well as confirming its involvement, it falls exactly in line with the priorities listed in an internal statement issued by its founder Joe Lubin ### beginning of this month, stating the company will renew its focus on being a blockchain consultant specializing in architecture and token design.
For the pilot, the bank will distribute several hundred dollars of BNDES to the National Film Agency, a film distribution company shortly called Ancine, to create and promote screenplays and film productions in Brazil.
Since the bank has a history of corruption scandals involving badly allocated funds and alleged bribes, the pilot creators are hoping that the public BNDES blockchain data will help boost confidence in state-owned banks.
The process will use the electronic identification certificates of the National Taxpayers Registry (Cadastro Nacional da Pessoa Jurídica, or CNPJ), which are already widely used by Brazilian companies as official registration documents
"We can apply the rules using smart contracts: the company that receives the money can only spend it with the companies that work in the [film] sector, "Vanessa Almeida, responsible for the development of BNDES systems, told CoinDesk.
Regarding the identifiers of the CPNJ, he added:
"We have a kind of identity document in Brazil that has a certificate to send a token to the company, the company must sign with this certificate … we will know in advance which address you can send tokens".
This project was developed, with the help of the developer of the Ethereum Foundation Alex Van De Sande, to allow the directors associated with Ancine non-profit to collect and share their financial records in real time. Recipients can redeem the stablecoin via the bank in local currency only.
All transaction data can be exploited to develop and inform future use cases as well. "This information can help guide public policies," said Almeida. "They will have a better map of this sector of the economy".
Taking a step back, cryptocurrency traders have so far been the experts of stablecoin, accumulating value in their exchange accounts that can be immediately exchanged for other cryptocurrencies without dealing with banks.
Trading companies like Paxos, Gemini and Coinbase all added fixed-rate cryptocurrencies in 2018. On the contrary, this Brazilian pilot shows a case of fiat-pegged crypt over speculative markets.
Rosine Kadamani, founder of the Blockchain educational academy in Brazil, told CoinDesk that this pilot could have knock-on effects across the country.
This is because the government-run development bank manages funds for projects ranging from educational initiatives to construction infrastructure such as roads and dams.
"Because unfortunately Brazil is very well known for corruption, there are many questions about the use of public funds," Kadamani said. "They start with a stablecoin which is basically an accounting control, because everything goes back to the bank, but in the future, if it works well, there are other implications."
In fact, Gladstone Moises Arantes, Jr., technical chief of the blockchain BNDES initiative, told CoinDesk that the bank will reevaluate the results of this pilot project and will consider expanding to other organizations that receive public funding.
He told CoinDesk:
"The concept we have could be used for other institutions in Brazil or the government as a whole."
Image of the BNDES token initiative team courtesy of the National Bank of Social Development of Brazil