Brazil envisions Drex replacing traditional transaction systems

Fabio Araujo, the coordinator of Brazil’s central bank digital currency (CBDC), Drex, foresees it eventually replacing the country’s current transaction systems, particularly the Reserve Transfer System (STR). 

Araujo emphasised that while the transition to Blockchain technology will take time due to the significant costs involved, the vision is to fully integrate all transactions into the Drex network over time.

Drex is currently in the second phase of its pilot program. 

According to the Central Bank of Brazil, the STR plays a critical role in the nation’s financial system, settling transactions across monetary, foreign exchange, and capital markets. 

Araujo highlighted that as blockchain technology advances, the system will evolve to handle all transactions. 

"All transactions would be made within this environment," he stated.

However, Araujo acknowledged that this migration will not be immediate. 

"I hope it takes time, because migrating the internet to blockchain is costly," he explained, emphasising the financial burden associated with such a shift. 

In 2023 alone, the STR settled the equivalent of Brazil's gross domestic product (GDP) every 2.2 days, illustrating the scale of operations involved.

As Drex grows, the implementation of new regulations will be necessary to manage the system's processes. 

Still, Araujo noted that no immediate regulations will be issued, given that blockchain technology will initially be applied to the existing financial environment.

Araujo also clarified that Drex’s system would not be involved with real estate records. 

The central bank does not plan to take over these operations, as the focus of Drex is solely on managing and simplifying financial settlements.