Taking up a challenge from Brazil’s central bank, Visa has built a prototype of a programmable finance platform for farmers using a CBDC.
Visa was one of nine firms picked by Banco Central do Brasil last year to participate in the ‘Lift Challenge Real Digital’, investigating various aspects of a CBDC.
The payments giant teamed up with Microsoft, Agrotoken and Sinqia to develop its submission; a programmable finance platform for SMEs, particularly farmers, that is designed to enable greater access to global capital markets, facilitate interoperability between currencies, improve operational processes, and uncover new growth opportunities.
Visa says that the prototype is designed to provide local farmers with more timely and greater access to a global pool of investors for financing, allowing them to get the best price discovery for their goods.
Catherine Gu, global head, CBDC, Visa, says: “By contributing our expertise, scale, network, and cutting-edge technologies in this market, we are able to help advance real-world applications of digital currencies — in this case making it possible for a soybean farmer to create and globally auction a tokenized contract on a permissioned version of the Ethereum blockchain, while utilizing different forms of money and interoperating between them.”
The programmable aspects of digital currencies, which allow delivery and payment of assets and currencies to be automatically settled only when certain conditions are met, open the door for more efficient capital usage and reduced counterparty risks, while leveraging the security, stability, and safety of a central bank liability via CBDC as a reliable settlement currency, says Visa.
The prototype platform brings existing financial processes and assets on-chain, allowing farmers to tokenize traditional financing contracts. To achieve this, Agrotoken brought its agriculture-based tokenization expertise from their existing solutions in Brazil and Latin America and Visa delivered a tokenization process for turning existing Brazilian legal documents into an on-chain tradeable NFT.
Visa also implemented a new onchain sealed-bid auction mechanism through smart contracts to enable a global pool of investors on the blockchain to participate in the financing process, achieving competitive price discovery. Additionally, the platform uses Visa’s Universal Payments Channel which can interconnect between the Real Digital and other CBDCs, stablecoins or tokenized deposits, to ensure interoperability between digital currencies across different markets and networks.