Drex can be considered the great turning point in the history of the creation of a tokenized economy, as it represents the acceptance of the token in the most sensitive area and, for a long time, the most resistant to its application: a country’s monetary system.
Resistance from governments and regulatory bodies was natural, after all, tokens are based on the premise of decentralizing power over assets and giving providers and investors greater freedom to negotiate.
All of this is supported by the excellent security and transparency of the blockchain and smart contracts, and here begins the story of the digital real and more than a hundred fiat token projects around the world.
The well-known benefits of the token for leveraging investment transactions are being extended to people’s daily lives, generating financial inclusion and greater business agility.
But will the drex replace the real thing?
Is there a difference between the digital real and cryptocurrencies?
For a business model as young as tokenization, many doubts are understandable and that’s why BLOCKBR, a company that develops tokenization infrastructure, will show you what drex is, its characteristics and advantages for the Brazilian economy!
WHAT IS DREX
In general terms, drex is the digital format of the real – the cryptographic version of fiat money. With the official launch on the market, every Brazilian will have access to three different and simultaneous forms of real: physical cash, bank account balances and the drex balance in a digital wallet.
It is important to note that it will not be compulsory to have a drex balance, but it is an important alternative to stimulate the digitalization of the economy among people, especially those who do not have access to the traditional banking system.
In a global view, drex is a CBDC – central bank digital currency – the most profound monetary transformation since the creation of bitcoin with its decentralized payment model.
To give you an idea of the magnitude of this transformation, in March 2023 there were already 114 projects to tokenize fiat currencies, representing 95% of global GDP.
Nations and economic blocs, such as the European community and its digital euro project, and the BRICS digital currency, are betting on the significant gains that the digital currencies of countries will bring to domestic economies and global business relations.
Among all these projects, the implementation of drex is one of the most advanced.
WHAT DOES DREX MEAN?
The term drex is an acronym made up of the following meanings: D for digital, R for real, E for electronic and X for the idea of modernity and connection. The bet is on a name that is simple and easy to remember, and that draws on the ease with which PIX has been incorporated into everyday language.
WHAT ARE THE MAIN FEATURES OF DREX?
ISSUANCE AND DISTRIBUTION
The issuance and regulation of drex offers will only be carried out by the Central Bank through a distributed ledger technology developed with technologies including blockchain, the same used to create crypto-assets.
However, it is important to note that this environment is exclusively accessible to the bank, unlike the public or private blockchain used by companies to issue cryptocurrencies and tokens.
The distribution of the Brazilian CBDC on the market – in practice, the transfer of the balance from the real to the drex – will be carried out by banks and financial institutions.
To receive and trade drex, you’ll need a digital wallet.
DAILY USE
The drex balance will be used for transactions in which the receiver accepts digital real. We can see that it will be a gradual process of market penetration, as players realize the advantages of using real digital.
On the other hand, as a financial digital asset, drex will be highly competitive in decentralized digital operations that work uninterruptedly and where digital currencies are absolute, such as the purchase of tokenized assets, and in operations that depend on conditionals.
Um bom exemplo é a transação imobiliária tokenizada, que exige total segurança para ser realizada e o real digital será um ator importante nisso.
Everything will be done instantly based on the conditions defined in the smart contract inserted into the blockchain. If the property does not have fiscal regularity – one of the conditions for the transaction – nothing will be done.
DREX VALUATION
The drex is the digital version of the national currency, so its value is pegged to the real – 1 drex will always be worth 1 real. However, drex is not a stablecoin, the digital currency paired with a real asset – commodity, another cryptocurrency or even a fiat currency.
The drex is a kind of digital mirror of the current currency, with no intrinsic value that could affect the real’s exchange rate with other national currencies.
MAIN DOUBTS ABOUT BRAZIL’S DIGITAL CURRENCY
Of course, there are many doubts even among capital market agents and bodies about how the token works in the economy. We’ve selected the main ones.
IS DREX A CRYPTOCURRENCY?
No, and the differences between cryptocurrencies and digital real are clear.
While digital currencies use decentralized management, outside of bank or government regulation, the digital real is issued and regulated by a monetary authority, the Central Bank.
This regulation does not affect the benefits of drex, as the purpose of CBDCs is to be an option to the use of legal tender.
Furthermore, the drex is not an investment; its exchange rate appreciation is merely a reflection of the traditional real, while digital currencies have a high degree of speculation.
IS DREX A TOKEN?
Technically yes, because both are encrypted digital assets. However, it should be noted that they have completely different purposes: while the digital real is an option for circulating money in the economy, the token is a digital vehicle for offering real and financial assets.
drex will be an effective way to buy tokens from a wide variety of projects, whether it’s a tokenized soybean crop or a fixed-income token, without the need to use cryptocurrencies.
WHAT’S THE DIFFERENCE BETWEEN DREX AND PIX?
This is a recurring doubt because instantaneity is the hallmark of both processes, which leads us to believe that they are the same thing. However, there are differences and the main one is the potential of drex to improve business.
It will be issued in a digital and regulated environment that will allow the development of innovations that will interconnect the financial system with services developed on the web3 and based on blockchain.
On the other hand, PIX is a product in itself with a defined purpose.
WHAT ARE THE BENEFITS OF DREX FOR BRAZIL?
GENERATE SAFER AND MORE AGILE BUSINESS
Negotiations with drex must go through platforms where they are managed through smart contracts – digital documents that regulate all the necessary conditions and without all of them being met, the deal cannot be concluded.
Negotiations with drex must go through platforms where they are managed through smart contracts – digital documents that regulate all the necessary conditions and without all of them being met, the deal cannot be concluded. As a result, we have more secure and agile transactions, due to the quality of processing in the digital environment.
This scenario will be even more important for international business with drex, as the globally recognized digital currency will be used.
GIVE MORE CREDIBILITY TO TOKENIZED OPERATIONS
Transactions with tokens and drex are individually encrypted and recorded in a digital ledger, available to all parties, providing credibility and an extra layer of security.
SUBSTANTIALLY REDUCE THE COST OF PAPER MONEY
Offering paper money is a significant cost for the financial system – the transportation of valuables alone, according to estimates, can reach R$10 billion a year, not counting the issuing and security of deliveries.
All this expense has a strong impact on the cost of banking services, which will be reduced over time with the increase in drex’s capillarity.
CURBING MONEY LAUNDERING
One of the biggest challenges facing the country’s financial system and judicial framework is finding ways to curb and prevent financial crimes, especially money laundering, which is carried out with cash and complex circuits for moving capital.
Trading with monetary tokens, within an environment with the security level of the blockchain, inhibits the commission of financial crime, as the entire transaction is 100% traceable and public.
DEMOCRATIZING AND REDUCING INFORMALITY
drex will promote financial inclusion for the unbanked population and will help to reduce the informal economy and, in the medium and long term, give people who are currently economically invisible access to credit.
RAISING THE QUALITY OF FINANCIAL AND BANKING SERVICES
Digital fiat money will stimulate innovation in the financial sector, encouraging the development of new blockchain-based and cryptographic solutions and services. In addition, reducing the costs of the physical money chain will enable more attractive financial products to be offered.
HOW THE DREX CREATION PROJECT IS GOING
The drex project began in 2020 when BACEN set up a working group made up of the most varied players in the financial and capital markets to assess the development of a digital version of the real.
Several stages have been successfully completed so far.
- Definition and dissemination of development guidelines;
- Evaluation of drex use cases;
- Technological feasibility studies;
- Development of the Central Bank’s drex platform;
- In May 2023, the drex pilot began with several participants;
- In July 2023, a forum was set up for debates with various representatives of society about doubts and proposals.
TESTS ALREADY CARRIED OUT WITH DREX
At the end of August 2023, the first transaction between banks involving the Brazilian CBDC balance was made, between Banco do Brasil and Caixa Econômica, with processing in the BACEN sandbox – the project’s development and testing environment.
This operation was surrounded by a lot of expectations, less for the success that was already expected and more for the accomplishment itself, as it represents a fundamental seal for the continuity of the digital real project and for the development of tokenization in the country.
MICROSOFT HAS ALREADY CARRIED OUT MORE THAN 150 TRANSACTION TESTS WITH DREX
Microsoft, participating with other large corporations in the multidisciplinary working group to test the functionality of drex, has already carried out around 150 transaction tests using a privacy solution developed by big tech.
The tests are for creating digital wallets – which will be used by consumers and investors, simulating customer accounts and transferring assets.
705 EXPERIMENTAL OPERATIONS CARRIED OUT
By December 2023, 705 experimental drex transactions had already been recorded among the 16 consortia of the digital real project.
The first impressions of BACEN and the participants are the best so far and the consensus is that the tests with the population will take place between the fourth quarter of 2024 and the first quarter of 2025.
WHEN WILL DREX BE RELEASED TO THE PUBLIC?
The drex was scheduled to be launched at the end of 2024.
However, due to the standard operation of BACEN’s servers, the project as a whole suffered delays and, once the pace of work had been re-established and with the positive results of the test transactions, the new drex implementation deadline was revised to the first quarter of 2025.
Currently, only three countries already operate CBDC: Jamaica, Nigeria and the Bahamas. If the new forecast is fulfilled, Brazil will be the first of the 10 largest economies in the world to operate with the national digital currency.
WILL DREX REPLACE THE ROYAL?
As we’ve seen so far, replacement is perhaps not the right term to use when talking about the projected use of drex in the market. A digitalized economy of opportunities is very different from democratizing access to them.
We are moving towards tokenomics, the potential for transformations that this scenario brings to economies and societies is incalculable and CBDCs are an essential part of this phenomenon.
After all, they confer a government seal of credibility.
Despite this promising scenario, unequal access to technology is still a major challenge. In Brazil, 29 million people still don’t have a cell phone.
On the other hand, the digitalization of the real will bring more agility with absolute security to complex negotiations – real estate, vehicles, shareholdings – and will compete for space where cryptocurrencies are, with the advantage of official approval.
This transition will be especially positive for the tokenization market.
Trading will be faster, increasing the liquidity of offers and investor confidence.
The popularization of the token, as a currency or as an asset, will stimulate investment so that more people have access to new technologies.
If it won’t be a tokenized world, it will be a world with more choices for everyone.
TOKENIZE ASSETS WITH BLOCKBR AND BOOST YOUR RESULTS!
Tokenization is a reality in the market, with an increasing number of companies and people generating revenue with tokens. Recent actions by BACEN and the digital real are increasing the credibility of the technology.
For the success of your project, it is essential to have an adequate and efficient tokenization infrastructure for the financial and other markets, comprising:
- Technical, fiscal and legal feasibility study;
- Issuance of tokens and smart contracts with transparent governance;
- Distribution of tokens on a simple and secure sales platform;
- Efficient and assertive tokenization governance.
Discover BLOCKBR’s infrastructure work for regulated and unregulated markets through an All-In-One platform that offers interoperability between assets and investors.
You don’t want to see your competitor get ahead to make more money.
Or do you want to?
BLOCKBR is a fintech specialized in building infrastructure that allows a simplified migration to tokenization, meeting the needs of a highly regulated environment.
Our main mission is to develop autonomy for the capital market so that it can move, grow and potentially access digital assets. We develop legal and technological solutions that create opportunities and simplify the way in which financial services will operate, from the structuring and new roles of the agents involved to the management and supply of these assets, generating efficiency, lower costs and greater speed of liquidity.
We take care of the entire technological infrastructure for tokenization and regulation, simplifying your life so that you can take care of your customer relationship.
Visit http://www.blockbr.com.br or @blockbr_ on social media and find out more!
