CBDC: Understand what the digital currency Drex is and its purpose

Digital currency Drex is the Brazilian real in the digital form, a representation of the traditional currency that will have the same values, guarantees and security aspects, but in a virtual environment.

Developed by the Central Bank of Brazil (Bacen), when launched, Drex will enable a wide range of secure financial transactions using digital assets and smart contracts. It can also help increase the inclusion of underbanked or unbanked people in the financial system. 

Want to know everything about Drex? Read the article and follow these topics:

• How did the digital currency Drex arise?
• What is the advantage of Drex?
• What is the difference between Drex and cryptocurrencies?
• What is the purpose of Drex in the international scenario?
• Drex digital currency – FAQ.

How did the digital currency Drex arise?

The Central Bank of Brazil has been monitoring the theme of “Central Bank Digital Currency” (CBDC) for a few years now. Many countries around the world are interested in the subject because they believe that CBDCs can make financial services and retail payments more efficient and accessible, thus promoting the financial inclusion of people with little or no access to banks.

Thus, in 2020, Bacen set up a working group to study the issue of what would then be called “Real Digital”. These initiatives and discussions on the subject resulted in the:

• Definition of “real digital guidelines”, first announced in May 2021 and updated in February 2023.
• Webinars on “The Real Digital” held in the second half of 2021 to discuss the potential applications of Drex.
• LIFT Challenge Real Digital, a research lab in a virtual collaborative environment, conducted in 2022 in partnership with Fenasbac to evaluate Drex use cases and its technological feasibility. 

Bacen officially named the digital real as “Drex” on August 7, 2023. According to Bacen, each letter of the word represents one characteristic of the digital currency:

• D: digital.
• R: real.
• E: electronic.
• X: innovation and connectivity, like the “X” in Pix.

What is the advantage of Drex?

Drex aims to be an innovative solution for the Brazilian financial market. According to Bacen, Drex will help the arrival of new financial service providers and business models at lower costs. Also, financial services conducted within the Drex ecosystem will have advantages, such as: 

• Automation: Drex’s financial services will be conducted through smart contracts, which can be adapted to customers’ convenience and needs. 
• Security: Transactions cannot be concluded until all the conditions established by the parties have been met. This reduces the risk for all parties involved.

• Inclusion: Drex’s aim is to increase the financial possibilities for Brazilians without replacing or eliminating the alternatives already in use.

What is the difference between Drex and cryptocurrencies?

Drex and cryptocurrencies  are similar because both are virtual and operate based on the blockchain technology. However, Drex has some important differences:

Drex is controlled by Bacen

Cryptocurrencies are issued in a decentralized manner, without permission and frequently without any regulations. Drex, on the other hand, will be issued and controlled by the Central Bank of Brazil. As such, it will behave more like physical money than as cryptocurrency, following its same policies. 

To learn more about the market regulation of cryptoassets in Brazil, read the article in our blog.

It is protected from volatility

In 2021, the annual volatility rate of Bitcoin, the most valued cryptocurrency, was 81% (Statista). Volatility is a common phenomenon in cryptocurrencies as these are not regulated and their value depends on supply and demand.

But Drex is different. It is the Brazilian real in the digital format, with equivalent value. Since the Brazilian real is a more stable currency, Drex is better protected from volatility than cryptocurrencies are.

It has more ways of use

A survey by Empresômetro has revealed that there are currently more than 4.8 million retail businesses in Brazil. Of these, around 1,000 establishments already accept cryptocurrencies as a payment alternative.

As such, one difference and advantage of Drex is that, being the Brazilian real in digital form, it can be used to make purchases at all types of physical and online stores, pay bills and make transfers, all of which make it an asset with more ways of use than are cryptocurrencies.

What is the purpose of Drex in the international scenario?

The development of CBDCs is a global trend in this new decade, driven by two factors: technological advances and the fact that physical money is falling into disuse. Currently, around 90 central banks around the world are working on or testing their own digital currencies. 

Drex is an interesting alternative for businessmen and local citizens, besides replicating the success of Pix and placing Brazil at the heart of financial innovation, and serving as the benchmark in the global market for new solutions in the sector.

Drex digital currency – FAQ

What is the difference between Pix and Drex?

Pix is an instant payments system, while Drex is the digital version of the Brazilian real. In the future, you can use your assets in Drex to make Pix, transfers and payments, as you currently do with your physical Brazilian real. 

Learn in few minutes everything about Pix, the instant payments tool.

How much will one Drex be worth?

Drex is the Brazilian real in the digital format. As such, 1 Drex will be equivalent to 1 Brazilian real. 

When will Drex be implemented?

Drex implementation is in the testing phase and Bacen should start running simulations for its launch. The exact date has not yet been defined, but the launch is expected in late 2024 or early 2025.

With Ebury Bank, your business can implement the most diverse and innovative payment alternatives – both current and future –  and you can thus reach all kinds of customers and score wins in Brazil and many other markets. Interested? Learn more from our website.