The operator behind Brazil’s financial markets, which manages more than $4 trillion in registered assets, has begun duplicating fund ownership records from BTG Pactual, Latin America’s biggest investment bank, onto the XRP Ledger. This process creates a public blockchain version of the data while keeping the original records securely in their current database.
Brazil’s CSD BR has turned to the public blockchain as a backup for tracking ownership of shares in certain BTG Pactual investment funds. The main record still sits with CSD BR’s own database, which keeps its standing as the legal source for registration, custody and settlement. Nothing gets placed directly on the XRP Ledger; it simply serves as a second record.
The Reconciliation Problem
The official record of who owns which securities sits with the depositories. When an investor buys into a fund, the depository updates its records, and the banks working on behalf of investors keep their own accounts, which they check regularly against the depository’s records to ensure they agree. This process, called reconciliation, takes time and costs money, and a disagreement between the two sets of records can delay a trade.
CSD BR’s blockchain copy was created to resolve that issue. Approved banks and companies can now examine the ledger copy directly and match it against CSD BR’s own database whenever they want, rather than waiting until after the fact to reconcile their own books. Every entry on the XRP Ledger, including any reversals made by CSD BR, is publicly recorded, which means any mismatch between the two sets of records would be plain to see.
Why Public, Not Private
A number of banks and depositories have tested private blockchains that are restricted to approved participants. CSD BR takes a different approach by using a public blockchain while retaining authority over which parties may possess the tokens. Every holder of these tokens can view their movements on XRP Ledger, yet CSD BR continues to determine who is permitted to own and move them.
CSD BR’s tokens run on XRP Ledger’s Multi-Purpose Token standard, which gives issuers of financial assets more control than what cryptocurrencies such as XRP offer. The standard lets the issuer limit who takes part and stop assets or undo transactions when needed by a regulator or court. Even so, participants must still clear the normal identity and anti-money-laundering tests before they can join.
From Test Assets to Live Funds
Ripple and CSD BR say the project begins with live fund records, which sets it apart from the blockchain pilots banks have run for years using test assets or closed networks. Actual fund ownership records are being copied onto the public ledger, even though CSD BR’s current system retains the final legal authority.
CSD BR came into being in 2018, and it operates under authorization from Brazil’s central bank and securities regulator alike. The company’s systems keep track of and hold positions for a range of instruments, among them securities, derivatives and other financial assets.
The Larger Plan
Later changes were bigger. Direct trading of assets on a blockchain lets ownership pass and settle within seconds, unlike ordinary securities trades that can take day or more to finalize. First mirroring live records gives the companies a working base to test that on.
After CSD BR grows familiar with the mirroring system, the firms intend to put it through its paces by issuing assets straight onto XRP Ledger and permitting authorized players to trade them there. The next round of candidates would be Brazilian real-estate receivables and agribusiness receivables, both well-established tranches of the country’s fixed-income market.
| Record Type | Role | Control |
|---|---|---|
| CSD BR database | Official record | CSD BR |
| XRP Ledger copy | Secondary record | Publicly readable, CSD BR controls ownership |
There exists a genuine issue with reconciling records, and the public blockchain resolves it through visibility. Each alteration gets recorded, so any discrepancy between the two records would become plain to see. The official record, however, remains fixed in its place, meaning the new system functions as a mirror image rather than a substitute.
The pilot began with live fund records, which sets it apart from most other trials. The usual approach relies on test assets or closed networks. Here, real funds are being used instead, giving the companies a working foundation for testing direct issuance and trading.
Brazil’s fixed-income market already has two well-established components:
- Real-estate receivables
- Agribusiness receivables
Should the mirroring framework prove reliable, the companies would be able to issue and trade those assets directly on the ledger themselves.
For now, the $4 trillion operator is watching the mirror work. The old record stays where it is. The new record simply shows what it says.
Source material: “XRP Ledger starts carrying fund records from Brazil operator overseeing $4 trillion,” CoinDesk.
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