Drex: Central Bank establishes official name for new Brazilian digital currency
The value will correspond to paper money. The transaction will be processed through virtual wallets and there will be no automatic adjustment. In other words, this digital currency will have the versatility to be exchanged between paper money and digital format.
The new Brazilian digital currency should be available to the general public by the end of 2024 - Foto Reproduction/Banco Central
The Central Bank (BC) released this Monday (07) the official name of the country's first digital currency, the Drex, also known internally as Pix's cousin. This name is a combination of the words "digital real", "electronic" and "transaction", symbolized by the X, or the expression "digital real x". It is expected that by the end of 2024, Drex will be made available to the general public. According to BC, this digital currency will have the flexibility to be converted between paper money and digital form, and its access will be made possible through virtual portfolios maintained in banks and other financial institutions.
“BC's marketing team created the name and put together several innovative elements. With that, we take one more step in the Pix family, which we created and are already so successful”, said Fabio Araujo, coordinator of Drex in BC, during the live announcement of the new name on YouTube.
According to the executive, Drex fulfilled a role similar to that of the "Financial Services Pix". This digital currency will enable the transfer of financial assets equally instantaneously to the Pix system. The Central Bank has also expressed its intention to increasingly digitize the Brazilian economy, with a view to increasing efficiency and security. Progress on the Drex project is a key piece of that plan, including enrollment with Open Finance initiatives and the Pix system.
The Drex
Drex represents the Central Bank's digital currency and corresponds to the national edition of "Central Bank Digital Currency" (CBDC), the digital division of the central bank. This new name will completely rebrand the entire project being developed by the Central Bank. Unlike, for example, money physically held in homes, digital currency will not incorporate an automatic remuneration feature. The Central Bank has the expectation that this new form of currency will contribute to reducing bank transaction related charges and broaden the inclusion of consumers in the emerging financial market.
“The digital real is an expression of the Brazilian sovereign currency, which is being developed to support a safe environment where entrepreneurs can innovate and where consumers can have access to the technological advantages brought by these new tools, without having to expose themselves to it. to an unregulated financial environment”, says the BC, in a note, adding, “The solution, previously referred to as Real Digital, will provide a safe and regulated environment for the generation of new businesses and more democratic access to the benefits of digitizing the economy, citizens and entrepreneurs”, explained the institution.
Difference between Drex and cryptocurrencies
Cryptocurrencies operate similarly to stocks on the Stock Exchange, where investors invest money seeking profitability. On the other hand, Drex will not have price fluctuations, as it will merely be a virtual representation of the physical Brazilian currency. In addition, cryptocurrencies exhibit price variations according to market supply and demand. An example of this is bitcoin, one of the most recognized virtual currencies, whose value has seen almost 4% in the last 30 days. On the other hand, the value of the real remains unchanged, that is, in other words, R$ 5 in physical banknotes will be equivalent to 5 virtual Drex.
“Just as the R$ 1 note is the same real that is in your bank account”, pointed out Aristides Cavalcante, head of cybersecurity at the BC, who also participated in the live.
It is important to note that, according to the Central Bank, the digital real will operate on blockchain technology, the same system used by cryptocurrencies. However, it is crucial to emphasize that it is not considered a cryptocurrency, as its validity is backed by the government.
Test phase
The tests will take place until March 2024 and involve transaction simulations (issuance, negotiation, transfer and redemption) and clients. The pilot environment is a collaborative space for testing and improvement, using DLT technology (Distributed Ledger Technology) known as Distributed Ledger, for operations related to Real Digital. The main objective is to assess the solidity of the infrastructure and the security of the information that will circulate on the network.
It is important to remember that the most widely known framework utilizing DLT technology is the blockchain, notorious for the success of bitcoin. For this pilot project, the selected platform is Hyperledger Besu, a blockchain network built on top of the Ethereum ecosystem.
