Brazil’s Central Bank to introduce virtual currency in 2024
Brazil's Central Bank announced on Monday (Aug. 7) its plan to adopt a virtual currency by the year 2024. This digital counterpart of the Brazilian real will be named "Drex" and it will hold an equivalent value to the physical cash currently in circulation.
According to the bank, each letter in the term "Drex" symbolizes a distinct facet of this innovative tool. The "D" signifies "digital," the "R" represents "real," the "E" stands for "electronic," while the "X" embodies modernity and connectivity. It also echoes the final letter of "Pix," an instant payment system instituted in Brazil in 2020.
Drex shall greatly simplify the lives of Brazilians. "This solution, formerly referred to as the 'Real Digital,' will establish a secure and regulated environment, fostering new business ventures and offering a more inclusive avenue for citizens and entrepreneurs to harness the advantages of a digitally-driven economy," the bank said in a statement.
Transactions
Drex distinguishes itself from cryptocurrencies, which are characterized by their price volatility linked to market dynamics. Drex, on the other hand, will maintain a fixed value equivalent to the Brazilian real. Every 1 real will correspond to 1 Drex. The Central Bank will ensure the stability of this digital currency, diverging from cryptocurrencies, which lack backing by any monetary authority.
Notable as a wholesale currency rather than a retail one, Drex will not be directly accessed by individual account holders. Instead, it will be accessible through virtual wallets connected to authorized payment institutions such as banks and financial intermediaries. Users will deposit real currency into these digital wallets, enabling them to conduct transactions using the digital version of the currency.
Tests
Although in testing stages since the beginning of the year, the digital real should be available to the Brazilian population only at the end of 2024. In March, the Central Bank designated the platform for transactional usage. In recent months, the monetary authority has authorized 16 consortia to develop financial tools and instruments that will be tested in the new system.
