In response to the growing global demand for a more digital and efficient business environment, the Central Bank of Brazil (BC) has announced the launch of the Drex, the digital Real. It should come into effect from 2024.
The Drex is a Central Bank Digital Currency (CBDC). It is issued by a country’s central bank and generally has its value pegged to that country’s official currency. The new digital currency will not replace the Real as we know it today, i.e., in paper form. It will be used in a different environment: digital.
The Central Bank’s aim with the launch of the digital Real is to offer Brazilian entrepreneurs access to more modern financial services, guaranteeing a secure environment for digital transactions. In this way, it enables an innovative, efficient, and inclusive financial ecosystem, promoting economic development and facilitating the active participation of business owners in the digital age.
Each letter of the Drex represents a characteristic of the currency: “D” for digital, “R” for Real, the currency, “E” for electronic, and “X” represents modernity.
How will Drex work?
The proposal is to instantly convert the funds deposited in the bank into Drex through a procedure called tokenization, which transforms a physical asset into a digital asset. This amount will be stored in a virtual wallet managed by financial institutions, such as banks and banking correspondents.
Drex will simplify access to large financial transactions, for example, the purchase and sale of government bonds, salary deposits and tax refunds, as planned by the Tax Reform.
With the secure transactions of the new digital currency, a wide range of applications is expected, from basic payments to smart contracts. This will allow agreements to be created instantly the moment Drex is used, speeding up negotiations.
Drex is not yet in circulation, however, according to the Central Bank, users must have a virtual wallet managed by an authorized institution in order to use the new digital currency.
Anyone can use the digital currency.
Will the new digital currency have an impact on the foreign exchange market?
The digital currency will have a rate equivalent to the Real, so it won’t work like a financial investment. Its value will remain constant, without changing over time. Therefore, the exchange rate will not be affected by Drex.
If you have any questions about foreign exchange operations, talk to Pryor Global. We help companies carry out foreign exchange transactions safely, efficiently, and economically. You can count on us to recommend the most appropriate exchange rate for each type of transaction.
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