DREX is the latest announcement from the Central Bank of Brazil, representing the digital version of the real, formerly referred to as the “digital real.” Interestingly, the acronym DREX, which stands for “Digital Real Electronic Transaction,” is in English despite being designed for use in Brazil.
Curious, isn’t it?
It’s also worth mentioning that in recent years, the Central Bank introduced the Pix payment system, which quickly gained widespread popularity. Now, with Drex, a new initiative is on the horizon.
But what sets Pix and Drex apart? Both share an “X” at the end—could the Central Bank have drawn inspiration from Elon Musk and his fascination with the letter “X”?
In this article, we’ll break down what DREX is, how it works, and, most importantly, the hidden risks this new digital currency might bring to your life.
Let’s dive in!
What is DREX?
DREX is the digital version of the real, developed by the Central Bank of Brazil to enable secure and fast financial transactions, serving as the official currency in digital format. In essence, it represents the evolution of the real into the digital age.
Unlike Pix, which is merely a payment method, DREX represents the currency itself, functioning as a Central Bank Digital Currency (CBDC).
While Pix provides the infrastructure banks use to facilitate payments, DREX will act as the digital currency powering these transactions in the future, even supporting Pix transfers using DREX.
The key distinction lies in its capabilities—unlike Pix, DREX allows for asset tokenization and provides a higher degree of control. It was developed by a working group formed in August 2020, which included Fenasbac (a non-profit organization representing employees of the Central Bank of Brazil) and other financial institutions.
How is DREX Being Built?
DREX, the digital version of the real, is being developed using advanced technologies like blockchain and Distributed Ledger Technology (DLT) to ensure security, efficiency, and traceability.
Here are the key technical components shaping the creation of Drex:
- Distributed Ledger Technology (DLT) Architecture
DREX is built on a permissioned blockchain architecture, meaning only authorized entities, such as participating financial institutions and the Central Bank of Brazil (Bacen), can operate nodes and validate transactions. This provides system security while maintaining centralized control.
- Tokens Representing Fiat Currency
The DREX currency operates with digital tokens representing Brazil’s fiat currency (the real). These tokens will be issued by the Central Bank and distributed to authorized financial and payment institutions.
These institutions, in turn, will make the tokens available to end users (individuals and companies), who can use them for payments, transfers, and other transactions.
The Central Bank is the sole entity authorized to issue DREX tokens, which are backed by corresponding fiat reserves, ensuring parity with physical reais.
- Interoperability with the Traditional Financial System
DREX is designed to be interoperable with Brazil’s traditional banking system and instant payment system, Pix.
This integration aims to facilitate a seamless transition between physical currency, Pix payments, and Drex, without disruption for the end user.
- Smart Contracts and Programmability
DREX’s infrastructure will allow the creation and execution of smart contracts. This means institutions and users can program automatic conditions for payments, settlements, and other financial functions.
- Security and Encryption
All DREX transactions will be secured with end-to-end encryption, ensuring that information is accessible only to authorized parties and that data remains protected during transmission.
- Modularity and Flexibility
DREX is designed with a modular architecture that allows for the integration of new functionalities and updates without disrupting the system’s operation.
This approach ensures the currency can adapt to new regulatory requirements.
- Compliance and KYC (Know Your Customer)
DREX will have built-in compliance mechanisms, enabling the Central Bank and financial institutions to monitor transaction legitimacy, including KYC checks and anti-money laundering (AML) measures.
- Governance and Centralized Control
The entire DREX system will be controlled and supervised by the Central Bank of Brazil. This means that all operational rules, issuances, transactions, and audits will fall under Bacen’s (The Central Bank of Brazil) governance, ensuring alignment with the country’s monetary policies.
The Hidden Risks of DREX
DREX is designed to operate as a distributed ledger system (DLT), enabling banks to convert customer deposit balances into tokens, facilitating access to new digital and “smart” financial services.
This technology allows for transactions involving digital assets and the use of smart contracts, but banks will still centralize operations through DREX.
This setup effectively grants the Central Bank even greater control over the financial system. And this isn’t speculation—the director of the BIS (Bank for International Settlements), often referred to as the central bank for central banks, has openly stated that the primary goal of CBDCs is to provide absolute power to central banks and governments over financial systems.
While DREX is marketed with enticing terms like financial inclusion, democratized access, innovation, and convenience, the underlying cost is substantial. By embracing it, we risk surrendering our personal data, the fruits of our labor, and even generational wealth to political and bureaucratic oversight.
Every CBDC, including DREX, carries an inherent risk: serving as a tool for mass surveillance. For authoritarian regimes, it represents the ultimate mechanism—total control over individuals’ finances and, by extension, their lives.
Therefore, although portrayed as a step forward, DREX or the digital real brings no significant advantages for the general population compared to existing systems. Instead, it amplifies the drawbacks of the current financial structure:
- currency devaluation due to perpetual inflation,
- political manipulation,
- creation of money without backing,
- and forced usage without the option to independently audit the Central Bank or commercial banks.
This issue isn’t confined to Brazil. DREX is part of a global initiative aimed at increasing financial control over populations, ultimately benefiting those in positions of power.
And this isn’t just a claim. Similar concerns are documented in materials discussing the digital euro.
What is the true goal of DREX?
The primary goal behind CBDCs, such as DREX, is to enhance control over monetary policies, including the ability to implement negative interest rates.
In practical terms, this means individuals would have to pay to lend money to the government through public bonds, effectively allowing the state to extract even more resources from its citizens.
In addition, CBDCs also enable practices like “helicopter money,” where governments distribute funds indiscriminately, regardless of the economic consequences. This can severely erode purchasing power by fueling uncontrolled inflation.
This process increases the so-called “seigniorage” for the state, which is the profit central banks earn by printing money. As a result, the government finances its own policies and investments by stealing value from the currency everyone is forced to use.
These goals are not speculative—they are backed by documented studies, such as those commissioned by the European Central Bank, which outline how CBDCs can be used to manipulate economies to benefit governments and central banks.
This paper highlights that CBDCs in general—not just DREX in Brazil—will likely have negative consequences for savers, eroding their purchasing power to fund populist policies. This mechanism allows governments to reduce their debts, even in the face of irresponsible spending, as the cost of money printing is passed onto the population.
In other words, we’re the ones footing the bill. Forced to use the currency, we watch as our purchasing power steadily declines.
But that’s not even the worst part.
With Drex, “printing money” becomes even simpler. Creating more tokens is as easy as pressing a button, requiring no effort or transparency. The real danger, however, lies in the mass surveillance this digital currency could enable.
With Drex, the government will have the ability to monitor all your spending. Every transaction you make will be under the watchful eye of the Central Bank. Additionally, tax collection could be carried out automatically, eliminating any possibility of individual control.
What’s even more alarming is a specific code that makes it easier to confiscate funds directly from users’ accounts.
A developer demonstrated this on GitHub, revealing how DREX’s (CBDCs) architecture allows for funds to be blocked or seized far more easily and efficiently than in the traditional banking system.
What are the differences between DREX (CBDCs) and Bitcoin?
The Digital Real is often promoted as the “Bitcoin of Brazil,” but in reality, it is much closer to a “shitcoin.”
Unlike Bitcoin, which tends to appreciate over time due to its scarcity and decentralization, DREX is entirely centralized, gives more power to politicians than to citizens, and even carries the risk of a rug pull akin to the confiscation that occurred during Brazil’s Collor Plan in the 1990s.
But that’s just the beginning. Let’s break down the key differences between DREX and Bitcoin:
1. Centralization vs. Decentralization
- DREX: Drex is a centralized digital currency issued and controlled by the Central Bank of Brazil. All rules for its operation, issuance, and monitoring are determined by this entity, meaning Drex follows Brazil’s monetary and fiscal policies. It is managed on a permissioned blockchain, where only authorized institutions can operate nodes and validate transactions.
- Bitcoin: Bitcoin is a decentralized currency, not controlled by any institution or government. Its issuance and transactions are governed by an open-source protocol and validated by a distributed network of nodes (computers) participating voluntarily in the mining and block validation process. Additionally, Bitcoin operates on a public, open blockchain that requires no third-party permission for transactions.
2. Issuance and Control
- DREXr: Drex is exclusively issued by the Central Bank of Brazil. The quantity of Drex in circulation is determined by the country’s monetary policy, and the Central Bank has full control over the digital currency supply. It can implement economic policies, such as adjusting interest rates or applying financial restrictions.
- Bitcoin: Bitcoin’s issuance is predetermined by its protocol and follows a fixed, transparent monetary policy, with a maximum total of 21 million bitcoins to be mined over time. Neither governments nor banks can alter this issuance policy, granting Bitcoin the properties of digital scarcity.
3. Monetary Policy
- DREX: It is subject to Brazil’s monetary policy, and the Central Bank can implement variable interest rates, control money supply, and take economic intervention measures. Thus, Drex is susceptible to governmental decisions and economic events, such as crises or inflation.
- Bitcoin: It is not tied to any national monetary policy. Its supply is fixed and deflationary, as the maximum number of bitcoins is capped. Consequently, Bitcoin is often considered a store of value or “digital gold,” protecting users from government inflationary policies.
4. Transparency and Auditability
- DREX: Although DREX uses a permissioned blockchain, control over transactions and network access is restricted to authorized institutions. This means the general public cannot directly audit transactions, and system transparency depends on the rules and policies established by the Central Bank.
- Bitcoin: Bitcoin’s blockchain is public and transparent. Anyone can audit transactions directly on the blockchain, and all Bitcoin transfers are visible to any network participant.
5. Privacy
- DREX: It offers little to no financial privacy, as transactions can be monitored and traced by the Central Bank and other authorized institutions. This enables the government to have full control and visibility over financial flows, which can be used to monitor illegal activities but also raises concerns about mass surveillance and financial privacy.
- Bitcoin: Bitcoin offers a certain level of privacy, though it is not completely anonymous since transactions on the blockchain are public. However, tools like mixers and technologies such as stealth payments and second-layer networks (e.g., the Lightning Network) can improve transaction privacy.
6. Technology and Network
- DREX: It is being built on a permissioned blockchain, meaning only authorized participants, such as banks and financial institutions, can operate nodes and validate transactions. This ensures greater system control but limits openness and accessibility.
- Bitcoin: It operates on a public, permissionless blockchain, meaning anyone in the world with internet access can participate in the network — as a miner, node operator, or simply a user. No authorization is needed to validate transactions or join the ecosystem.
7. Usability and Scope
- DREX: It is designed for exclusive use within Brazil and adheres to the country’s economic regulations. Its main purpose is to facilitate digital transactions within Brazil’s financial system, promoting greater efficiency in payments and bank transfers.
- Bitcoin: It is a global, borderless currency. It can be used by anyone, anywhere in the world, for financial transactions without relying on banks or governments. Moreover, Bitcoin is widely used as a store of value and a means for international fund transfers.
Final Considerations
Looking at history, the Brazilian real has already lost 86% of its purchasing power over its 28 years of existence, and DREX does nothing to change this trajectory. The Central Bank will continue creating money out of thin air, as it always has.
In fact, the introduction of a new digital currency only reinforces this inflationary practice.
True digital money is Bitcoin. It provides individual sovereignty, resists censorship, and cannot be manipulated by governments or central banks.
The Digital Real and other CBDCs, by contrast, is a trap designed to keep you confined within the fiat system. Bitcoin is your escape.
Until next time—opt out!
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