Brazilian financial-infrastructure provider CSD BR has launched the first phase of a partnership with Ripple Labs to use the XRP Ledger, or XRPL, in real-world financial-market operations. The project will initially mirror tokenized units of BTG Pactual investment funds on the public blockchain, allowing participants to verify ownership records almost in real time without changing the status of CSD BR’s official registry.

CSD BR announced the project as an additional layer for asset recordkeeping. Its existing systems will remain the official source of information for registration, custody and settlement.

Blockchain layer to mirror fund records

CSD BR is authorized to operate as a registrar, central securities depository and settlement system. The company services registered assets worth more than 22 trillion Brazilian reals ($4 trillion) and can process millions of transactions within minutes.

During the first phase, BTG Pactual fund units held at CSD BR will be tokenized under the multi-purpose token, or MPT, standard and mirrored on XRPL. The blockchain layer will support record verification and auditing, increase the transparency and traceability of operations, automate some processes and allow participants to check record consistency almost in real time.

Daniel Polano Spreafico, CSD BR’s head of products and clients, said the company began by mirroring records because it is "the safest and most responsible way to introduce new technology into critical market infrastructure."

The architecture also provides for the use of Ripple Labs’ custody infrastructure and XRPL capabilities. Corporate and banking clients in Brazil that complete know-your-customer and anti-money-laundering procedures will have access to the system.

CSD BR will retain control over asset issuance and administration. That control will include the ability to freeze specific assets and conduct clawbacks under a regulatory or court decision.

Further uses depend on testing

The current stage is intended to test the technology in real-world operations without changing participants’ legal obligations or the official status of the records. Silvio Pegado, Managing Director of Ripple Labs in Latin America, called the move from pilot projects to infrastructure operating in Brazil’s national capital market "an important milestone for the industry."

If the record-mirroring stage succeeds, the partners plan to expand their use of blockchain gradually. Potential next phases include the native issuance of tokenized assets, trading between authorized participants and the tokenization of real estate receivables certificates, known as CRI, and agribusiness receivables certificates, known as CRA.

CRI and CRA represent significant segments of Brazil’s fixed-income instruments market. The partners also expect to add privacy mechanisms to meet financial-market requirements.

BTG Pactual said its participation allows the bank to apply blockchain technology in the funds market through regulated infrastructure and real transactions. Luis Furtado, a BTG Pactual partner, said, "the mirroring of fund units creates a concrete foundation for future developments, while preserving current processes and the official asset registry."

The model is not limited to Brazilian assets and could eventually be adapted for new asset classes, additional participants and potentially other international markets.

Ripple Labs recently obtained a service-provider license in Luxembourg, while Petrobras, Brazil’s largest oil and gas company, began testing the Cardano blockchain.

Source: Incrypted