Allan Augusto Gallo Antonio, Economics and Law professor at Mackenzie Presbyterian University (UPM) and Researcher at the Mackenzie Center for Economic Freedom (CMLE).
Jhonathan Augusto Gallo Antonio, lawyer and master’s student in Economics and Markets at Mackenzie Presbyterian University (UPM).
The DREX, Brazil’s new and first digital currency, will be launched soon and has been presented as a promising innovation for the national financial system, but not all predicted impacts are necessarily beneficial to the population. Although the official discourse only points out advantages, such as greater efficiency and reduced transaction costs, DREX can also generate consequences that negatively affect some citizens, especially in terms of privacy and digital exclusion.
A strongly used argument in defense of the use of DREX in the national territory is the reduction of transaction costs, which, according to the transaction cost theory, can increase the efficiency of economic exchanges.
However, in the Brazilian context, this efficiency is not guaranteed, given that a significant percentage of the population does not have easy access to digital devices and the internet. Thus, the potential technological imposition brought by Brazil’s first digital currency can, by increasing the population’s dependency on technologies that are not accessible to all, contribute to an intensification of social inequalities, especially concerning the poorest and most peripheral regions.
There is another aspect that causes concern: privacy. DREX will be based on blockchain technology, which essentially means there will be traceability and transparency in all transactions, raising serious concerns about the protection of personal data.
In this line, in line with the theory of externalities, while this technology will be beneficial to the government in combating fraud and financial crimes, the constant tracking of transactions may expose personal information and sensitive data of individuals, creating an atmosphere of continuous and permanent surveillance. From this, the following ethical question can be raised: to what extent would the Brazilian population be willing to give up their privacy in exchange for a supposed greater efficiency in the financial system?
Finally, from the perspective of monetary policy, the DREX has the potential to give the Central Bank of Brazil even greater control over the money supply and consequent inflation. Although many believe that this type of intervention can, in some way, be positive in economic terms, the truth is that this potential tighter control may end up resulting in greater state interference in people’s financial lives and make the monetary system more susceptible to eventual manipulations and political pressures. All this centralization, far from being a universal benefit, can generate governance risks and end up creating forms of economic restrictions.
Although the DREX is constantly presented as a modern and efficient innovation for the Brazilian financial system, the promised benefits may not make sense when compared to the potential harms that come with them. Thus, digital inequalities, threats to privacy, and greater concentration of power in monetary issues can end up creating more challenges than solutions, particularly when it comes to the most vulnerable layers of society. Therefore, it is essential to exercise great caution when adopting the perspective that the new digital currency will mean an undeniable advance for the economy.
