Drex - The Digital Real: Innovation and Security in the Brazilian Financial System
What is Drex?
Drex, also known as Real Digital, is the digital version of the official Brazilian currency, created by the Central Bank (BC). It promises to revolutionize the financial landscape by bringing a new level of security and efficiency to transactions involving digital assets and smart contracts.
How does Drex work?
The Drex Platform uses Distributed Ledger Technology (DLT) to facilitate digital financial transactions. To access the platform, you will need to use an authorized financial intermediary, such as a bank. These intermediaries will transfer funds from traditional accounts to Drex digital wallets, enabling secure transactions with digital assets.
One of the major differences is the use of smart contracts, which ensure that transactions are only completed when all stipulated conditions are met. This reduces risks for all parties involved.
For example, when purchasing a car, the contract will only be finalized when payment and transfer of the vehicle occur simultaneously. If one of the parties fails to comply with the agreement, the money and the asset will return to their respective owners.
Why "Drex"?
The name reflects modernity and technological connection. The letters "d" and "r" refer to Digital Real, the "e" represents electronic, and the "x" symbolizes connection. The logo includes arrows that refer to digital transactions and the evolution towards the digital environment.
Drex Pilot: Testing the Digital Future
The Drex Pilot is the experimental phase of this initiative, evaluating the benefits and possibilities of digital currency in a multi-asset ecosystem based on DLT technology. In this phase, participants, such as banks and authorized institutions, carry out simulations of digital transactions with Drex. End users do not yet participate directly.
The first phase, which ended in 2023, focused on testing privacy and programmability through cases such as the simultaneous settlement of federal government bonds between different institutions. The second phase, which began in 2024, is exploring use cases aimed at real solutions in the economy, with applications open until November 29, 2024.
Who Can Participate?
Authorized financial institutions capable of carrying out transactions such as issuing, redeeming and transferring assets on the platform may submit proposals. The rules are detailed in BCB resolutions 315/2023, 382/2024 and 423/2024.
Project Governance
The Executive Management Committee (CEG) is responsible for the governance of the Drex Pilot. Composed of employees from different departments of the Central Bank, the committee manages the criteria and execution of the project phases.
Technology and Security
Drex is based on a multi-asset DLT platform that enables the registration and trading of diverse assets, such as bank deposits, payment accounts and government bonds. All transactions are conditional and simultaneous, ensuring atomic settlement (Delivery versus Payment - DvP) and eliminating negative balance risks.
Next Steps
The results of the testing phases will determine when Drex will be made available to the general public. The initiative reinforces the BC# Agenda, promoting modernization, efficiency and security in the Brazilian financial system.
Sources:
- Central Bank of Brazil: Drex
- Central Bank of Brazil: Drex Pilot