CBDCs in emerging economies include the digital yuan in China, the first launched by a major economy and operational since 2021. The Chinese government has been trying to stimulate uptake of its CBDC via initiatives such as discounts and digital yuan lotteries, but less than a fifth of the population currently uses it. By automating processes and eliminating intermediaries from the transaction, tokenisation is expected to reduce the cost of financial products like credit or investment products for the population.
In an era where digital transformation is reshaping every facet of our lives, the financial sector is not left behind. The global trend toward digital currencies, marked by the exploration and adoption of Central Bank Digital Currencies (CBDCs), reflects a significant shift in how nations perceive and manage monetary policy, financial services, and financial inclusion. Among these innovations, Brazil’s Drex stands out as a forward-thinking initiative. Drex, as Brazil’s response to the digital currency movement, embodies the country’s ambition to modernize (upgrade) its financial ecosystem, enhance economic efficiency, and broaden financial access across its diverse population.
The Central Bank of Brazil has decided to update the Drex Pilot Project guidelines to support the further development of its infrastructure in a subsequent testing phase. The goal is to add new features and conduct more tests to improve the platform.On May 25, the Central Bank of Brazil announced that they are reviewing a promising solution from Microsoft. ZKP Nova is the new solution proposed to securely and quickly handle on and off-chain data. This patent-pending module uses Hamsa’s smart contract technology to create private rooms on a blockchain, keeping participants’ wallets, balances, and transactions private. It also illustrates one of the future uses of DREX, a digital currency issued by the Central Bank of Brazil as an extension of the country’s physical currency, the real.
The Banco Central do Brasil (BCB) and the Comissão de Valores Mobiliários (CVM) have been pivotal in propelling Brazil’s fintech sector, especially in blockchain technology adoption. Their regulatory frameworks have encouraged a wide range of financial institutions to explore and embrace different technologies, such as blockchain, fostering a collaborative ecosystem that includes banks, fintechs, and startups. This CBDC initiative is a testament to the transformative power of such regulations, with the potential to redefine financial transactions within the Brazilian financial system and set new standards for digital currencies globally. The cooperation started by BCB and CVM’s guidelines highlights blockchain’s capacity to modernize financial services, offering lessons and insights for the global adoption of similar technologies.
The plan initially worked and the real gained value against the US dollar, backed by large capital investments in Brazil, particularly in 1994 and 1995. After 1995 however, the Real experienced a gradual downfall culminating in a crisis in 1999. In 1994 the “Plano Real” was introduced to control inflation and to stabilize the Brazilian currency and economy.
BRASILIA (Reuters) – Brazil’s central bank forthcoming digital currency, set to launch next year, will be named DREX, it announced on Monday, aiming to use the currency to boost financial services. CBDCs are similar to stablecoins – a private-issued cryptocurrency pegged to another currency, commodity, or financial instrument using public blockchains. The fundamental difference, however, is that CBDCs are state-issued currencies linked to the country’s official currency and running on private blockchains. The BCB began its journey towards a CBDC in August 2020, with the creation of the first working group to study the feasibility of a digital currency. Brazil has made considerable advancements since then; its pilot programme, which started in March 2023, is due to produce an assessment by mid‑2024.
On the 7th, the central bank announced the latest developments regarding its CBDC, named Drex. The new feature is being introduced nearly three years after the release of Pix, Brazil’s instant payment method, and is scheduled to launch in 2024. Drex is designed to help financial institutions streamline and secure financial transactions using advanced technologies such as blockchain and smart contracts. This approach enhances the speed and reliability of digital payments both domestically and internationally.
