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Montevideo, July 22nd 2024 - 17:32 UTC



Brazil's Central Bank launches digital currency plan

Tuesday, August 8th 2023 - 10:25 UTC
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Unlike cryptocurrencies, the digital real (or Drex) is guaranteed by the BCB Unlike cryptocurrencies, the digital real (or Drex) is guaranteed by the BCB

Brazil's Central Bank (BCB) Monday announced a new digital currency for South America''s largest country, which will be called “Drex” and is not expected to reach account holders before late 2024, Agencia Brasil reported.

A virtual currency that will be tantamount to cash, the digital real will be called Drex, the Central Bank (BC) confirmed Monday. The name was confirmed by BC economist Fabio Araujo, coordinator of the initiative, in the monetary authority's weekly live on YouTube.

According to the CBC, each letter of the digital real is equivalent to a feature of the tool. The “D” represents the word digital; the “R” represents the real; the “E” represents the word electronic; and the “X” conveys the idea of modernity and connection, in addition to repeating the last letter of Pix, an instant transfer system created in 2020.

Drex, the Central Bank said, will make life easier for Brazilians. “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 the digitalization of the economy for citizens and entrepreneurs,” said the agency.

Unlike cryptocurrencies, whose price is linked to demand and supply and has a lot of volatility, Drex will have the same value as the real. Each BRL 1 will be worth 1 Drex, with the digital currency being guaranteed by the Central Bank, while cryptocurrencies are not guaranteed by any monetary authority, Agencia Brasil also explained.

A wholesale currency, not a retail currency, Drex will not be accessed directly by account holders, but through virtual wallets linked to a payment institution, such as banks and banking correspondents. The customer will deposit in these wallets the correspondent in reais and will be able to make transactions with the digital version of the currency.

In practice, Drex will function as a cousin of Pix, but with different purposes and value scales. While Pix obeys security limits and is mostly used for commercial transactions, Drex can be used to buy real estate, vehicles, and even government bonds.

The digital real should be available to the population only at the end of 2024. In March, the Central Bank chose the platform to be used in transactions. In recent months, the monetary authority has enabled 16 consortia to develop financial tools and instruments that will be tested in the new system.

Scheduled to begin in September, the tests with the consortia will take place with simulated operations and will test the security and agility between the digital real and the tokenized deposits (real assets converted into digital) of financial institutions.

The assets to be used in the pilot project will be the following: deposits from bank reserve accounts, settlement accounts, and the National Treasury's single account; bank demand deposits; payment accounts of payment institutions; and federal government securities. The tests will be done in stages, with simulated transactions with National Treasury securities being done only in February next year.

(Source: Agencia Brasil)

Categories: Economy, Brazil.

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