By providing a secure platform for tokenizing traditional financing documents into “on-chain” tradable nonfungible tokens, Visa’s solution will enable farmers to receive loans with customized terms.
Visa has developed a new, programmable-finance prototype for Brazilian farmers using a central bank digital currency (CBDC).
Buoyed by the success and popularity of the Pix instant payment system, the Brazilian Central Bank plans to launch a CBDC, the digital real, in 2024; and Visa is one of nine finalists of the LIFT (Financial and Technological Innovation Laboratory) Real Digital Challenge, established by Banco Central do Brasil and the National Federation of Associations of Central Bank Employees to encourage innovation and assess use cases and technological feasibility.
“When we set out to tackle the challenge presented to us,” explains Catherine Gu, global head of CBDC for Visa, “the goal was to demonstrate how smart-contract programmability can be used for real-world applications. As required by the LIFT Challenge, we showed how the digital real might be used in DeFi [decentralized finance] or related. For this use case, we looked at how programmable finance could create more financial access for local farmers in Brazil. This is one of the many potential use cases for creating financial inclusion. As we continue to research and develop, we may see more use cases that use CBDC for programmable finance, but that does not mean all use cases have to be CBDC backed.”
By providing a secure platform for tokenizing traditional financing documents into “on-chain” tradable nonfungible tokens and auctioning them via smart contracts to global investors, Visa’s solution will enable farmers to receive loans with customized terms based on their unique needs and circumstances.
“We learned a lot throughout this process about integrating tokenization into business processes and the design elements involved with building both front-end and back-end solutions that work,” states Gu. “Our team internally at Visa worked closely with our partners at Agrotoken, Microsoft and Sinqia to build the prototype to meet the needs of the local farmers and potential financial investors.”
Universal Payments Channel, a Visa technology that can interconnect between the digital real and other CBDCs, stablecoins or tokenized deposits, will ensure future interoperability between digital currencies across different markets and networks.