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The Origin of DREX

The global landscape is shifting towards Central Bank Digital Currencies (CBDCs). Nearly all of the world's GDP is represented by countries actively exploring CBDCs, driven by the potential for increased efficiency, improved financial services, greater competition, and significantly, enhanced financial inclusion. Brazil's journey with the Digital Brazilian Real (DREX) began years ago, recognizing these global trends and their implications for the Brazilian economy.

Early Motivation (August 2020)​

The impetus for DREX stemmed from a clear recognition of the limitations of a purely physical currency in an increasingly digital world. While electronic payments were surging, the Brazilian Real remained a physical entity. This disconnect fueled the need for a digital counterpart:

Key Drivers
  • Cost Reduction: The significant cost of issuing and maintaining physical currency (estimated at R$90 billion annually) presented a compelling economic argument for a digital alternative.
  • Financial Inclusion: Expanding access to financial services for the underbanked population was a key strategic objective driving the initiative.

Technological Vision​

From the outset, the vision for DREX extended beyond simply replicating physical currency in a digital format. The potential integration of cutting-edge technologies was central to the project:

  • Smart Contracts: Automating transactions and enforcing agreements
  • Internet of Things (IoT): Enabling seamless integration with various devices and systems
  • Programmable Money: Facilitating innovative applications and business models

Key Actions​

The Banco Central do Brasil (BC) embarked on a multi-pronged approach to develop DREX:

1. Guidelines for the Digital Real​

Formally established in May 2021 (with updates in February 2023), providing a comprehensive framework for DREX's development and implementation.

2. "O Real Digital" Webinar Series​

A series of seven open virtual forums held in the second half of 2021 engaged stakeholders in discussions about various aspects of the then-called "Real Digital":

  1. The potential of the digital Brazilian Real
  2. Citizenship, data security, secrecy, and traceability
  3. Offline Operations
  4. Smart contracts, IoT, and programmable money
  5. Issuance & Distribution
  6. International integration
  7. Technologies for CBDC issuance
Watch the Series

You can watch the complete webinar series on YouTube.

3. The LIFT Challenge​

Launched in 2022 in partnership with Fenasbac, this collaborative initiative aimed to assess DREX's viability through innovative project development.

Transition to DREX​

In August 2023, the Brazilian Central Bank officially rebranded the Digital Real project as DREX. This strategic rebranding aimed to:

  1. Simplify Communication: Following the pattern of most countries' CBDCs, providing a specific name for easier public understanding
  2. Standardize Messaging: Avoiding technical terms like "real digital," "tokenized real," or "smart settlement platform"
  3. Build Brand Family: Continuing the BC's solution family that started with PIX
  4. Enhance Public Understanding: Making the initiative more accessible to the general population
Brand Development Timeline
  • 2022: Initial brand development began when the main aspects of Brazil's CBDC model became clearer
  • August 7, 2023: Official announcement of the DREX brand
  • August 11, 2023: BC released detailed explanations about the new brand and its meaning

Public Communication​

The BC has maintained transparent communication about DREX through various channels:

  • LiveBC #10 session explaining the impact of DREX on citizens' lives
  • Regular press releases and official communications
  • Comprehensive FAQ addressing common questions about the digital currency

Sources​

Official References