Major financial entities in Brazil are gearing up for the widespread implementation of Drex, the digital currency initiative led by the country’s central bank.
As the central bank of Brazil moves forward with the launch of its digital currency, Drex, prominent financial institutions including Itau Unibanco, BTG Pactual, and Santander Brasil are intensifying their preparations. These leading banks are expanding their workforce and investing in necessary technology infrastructure to support the countrywide adoption of Drex.
Roberto Campos Neto, President of the Central Bank, has been a consistent supporter of digital assets, holding this position even as some of his international counterparts have adopted a more cautious approach. Since taking office in 2019, Campos Neto has argued that blockchain technology is a lasting innovation with the potential to enhance the stability and efficiency of financial systems, rather than a fleeting trend. The Drex platform, regulated by the central bank, will leverage blockchain technology to create a new ecosystem, enabling the digitalization or “tokenization” of a diverse range of financial assets, from equities to bonds.
This innovative platform will streamline the process of asset transfer through digital transactions. Banks and other authorized entities will be responsible for processing and verifying these transactions within the Drex ecosystem. While Drex itself will not directly issue digital tokens, it will offer a platform for the creation of such digital assets, as explained by officials from the central bank.
The financial institutions’ dedication to Drex represents a continuation of their wider digital transformation strategies. Itau Unibanco, which is on the verge of announcing its third-quarter earnings, has recently launched a digital asset custody service, with plans to extend this service to individual consumers in the near future.
This progress is supported by recent regulatory changes in Brazil, facilitating investment in digital currencies. The Brazilian Securities Exchange Commission has introduced new legislation, effective from October 2nd, permitting hedge funds to invest up to 10% of their managed assets in digital currencies. This represents a notable shift from previous regulations that barred Brazilian investment funds from directly acquiring digital currencies, as they were not classified as financial assets.