The Relationship between Technological development and Digital Currency in Brazil——Ghanwa Arshad

 According to the Brazilian Software Association (ABES)’s report The Brazilian Information Technology Market was valued at $46.2 billion and grew 8.2% in 2022. Brazil represented 40% of the Latin American Market and ranked 10th in the IT world market. But now Brazil’s central bank is going to launch a Digital currency named DREX by the end of 2024.

DREX will work as Digital ledger technology DLT to settle wholesale interbank transactions, and work on tokenized based bank deposits for retail access. The design of this digital currency would encourage banks to tokenize their assets, with considerable efficiency gains and had received international attention.

Brazil set to introducing Blockchain Technology

Brazil is going to revolutionize its national identity system by introducing blockchain technology. It aims to provide over 214 million Brazilians with a digital identity.

Pioneers of this technology

The states of Rio de Janeiro, Goias and Parana are the pioneers of this initiative. Issue of identification documents on the blockchain is facilitated through a collaboration with Serpo, Brazil’s esteemed national data processing service.

Why Blockchain?

● Blockchain technology plays an important role in securing personal data and deterring fraudulent activities.

● This project is not just about modernization but also plays a strategic role in Brazil's fight against crimes.

● This will allow citizens a more straightforward way to access essential services.

● This program provides citizens to obtain identity documents through a digital wallet, by introducing another step in the continent’s digital transformation journey.

Brazil’s foray into digital currency

When the national ID project is making headlines about technological development in Brazil, the country is also making strides in the realm of digital currency.

In August, the government shared details about its central bank digital currency (CBDC) project, now named DREX.

DREX, Brazil’s Upcoming Digital Currency

But Fabio Araujo, the coordinator of this initiative pointed out the importance of DLT technology in a live discussion organized by the central bank. He said that we can reduce costs and improve access to financial services in the country. He also talked about the instant payment platform Pix which was launched in late 2021. Now, the DREX will give a boost to investments, lending and insurance services.

What is CBDC?

CBDC is a “Central Bank Digital Currency” issued by a country’s central bank and backed by the official currency of the country. CBDC’s are similar to stablecoins, these are state-issued currencies linked with the country’s official currency running on private blockchains.

How DREX will shape the future of technological developments in Brazil

DREX will provide a significant advancement in the Brazilian financial and technological realm by simplifying the complex financial operations. Physical cash usage demands for cryptocurrencies like Bitcoin and Ether to rise but DLT is such a blockchain that is keeping pace with the rapidly changing financial landscape.

Research shows that 130 countries (98% of the global economy) are exploring central bank digital currencies. The central bank states that CBDCs are necessary to ensure compatibility with the current financial system.

Brazil’s Crypto Adoption

Brazil’s inclination toward cryptocurrencies has surged with 10 million users, Brazilian central bank is poised to ensure its currency and payment market remains predominant against these rising currencies. Thus, DREX makes a strategy for broader financial inclusion.

DREX’s Ambition for Rurals

In rural areas traditional banking systems providing services, acquiring loans becomes a daunting task for farmers and small or medium scale’s people. DREX will introduce a digital wallet to make their complex tasks easier.

DREX Balancing Transparency and Privacy

DREX is a potential solution to endemic corruption, granting citizens the power to scrutinize the financial dealings of elected officials. Its programmable aspect might restrict user’s financial autonomy. This duality sparks concerns about an individual's privacy.

Potential Roadblocks

DREX boosts immense potential to cope with challenges. The elimination of tangible cash complicates matters. DREX will push the authorities towards more accountable actions by giving the global ease of currency in today’s digital era.

Practical impact of DREX will be on the daily lives of Brazilians

● Practically DREX will help in expanding financial services accessibility.

● People can make easy loans, investment options or easier insurance through DREX.

● It will enable municipalities and state entities to maintain cryptocurrency wallets.

● This technology will enhance transparency and oversight of public funds allocation.

● This is such a great initiative to bring financial products into people’s hands and increase banking in Brazil.

Conclusion

Brazil’s step towards blockchain technology to integrate its national identity system is the nation’s forward- thinking approach. As the world fastly moving towards a digital paradigm, Brazil’s efforts are valuable in this age and it strong's its position as a leader in technological innovation and security in South America.

Brazil is on the way to a more secure and interconnected digital world.


References

https://www.reuters.com/markets/currencies/brazil-central-bank-la unch-its-digital-currency-2024-2022-12-13/ https://www.insiderintelligence.com/content/brazil-wants-build-ondigital-payment-success-with-cbdc-pilot https://agenciabrasil.ebc.com.br/en/economia/noticia/2023-08/bra zils-central-bank-introduce-virtual-currency-2024

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Introduction：

     Our group is studying the digital currency Drex, which will be released in Brazil in 2020. With the development of time and the continuous upgrading and changes of technological innovation, more and more countries are now turning to digital economy and finance. Digital currency is gradually becoming a trend of economic development in China. The issuance of digital currency can not only create new economic value for the economic and financial fields but also create different conveniences and security for people's livelihoods and government. For the economic sector, digital currency can stimulate economic growth. According to research data from BOC Bank in Canada, after the introduction of digital currency, the economies of Canada and the United States grew by 0.64% and 1.6% respectively. (2023) That is to say, for the economy, digital currency has played a positive stimulating role in the development of the economy.      However, in the process of research and development, dist
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Conclusion

     After four weeks of learning and in-depth research on Brazil's digital currency, we now have a more comprehensive and in-depth understanding of the upcoming digital currency in Brazil. In the process of learning, we have learned that with the advent of the digital age, more and more countries and economic and financial fields are inclined towards digital development. The development of digital painting is not only enough to save costs and achieve sustainability but also plays key technical support in the country's overall economic control. Brazil should follow the current trend and make good use of digital technology, especially in the era of the economy. The emergence of digital currencies has brought more possibilities to Brazil's economy. Digital currency not only increases the government's macro-control over economic conditions but also enhances the convenience and flexibility of payment transactions for the people. Although global economic development was not
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