DREX: what you were not told about the new Brazilian digital currency

Allan Augusto Gallo Antonio, Professor of Economics and Law at Mackenzie Presbyterian University (UPM) and Researcher at the Mackenzie Center for Economic Freedom (CMLE).

Jhonathan Augusto Gallo Antonio, lawyer and master's degree in Economics and Markets from Mackenzie Presbyterian University (UPM).

DREX, the new and first digital currency in Brazil, will be launched soon and has been presented as a promising innovation for the national financial system, but not all the expected impacts are necessarily beneficial to the population. Although the official discourse points only advantages, such as greater efficiency and reduction of transaction costs, DREX can also generate consequences that negatively affect part of the citizens, especially in terms of privacy and digital exclusion.

A strongly used argument for the respective defense of the use of DREX on national soil is the reduction of transaction costs, which, according to the theory of transaction costs, can increase the efficiency of economic exchanges.

It happens that, 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 that will be brought by the first digital currency of Brazil can, by increasing the dependence of the population on technologies that are not accessible to all, corroborate to an intensification of social inequalities, especially in relation to the poorest and most peripheral regions.

There is another aspect that causes concern: privacy.DREX will be based on blockchain technology, this, in simple terms, means that there will be traceability and transparency in all transactions, which ultimately raises serious concerns regarding 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, DREX has the potential to give BACEN even greater control over the money supply and the consequent inflation. Although many believe that this type of intervention can somehow be positive in economic terms, the truth is that this potential stricter control can 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 constraints.

Although DREX is constantly presented as a modern and efficient innovation to the Brazilian financial system, the promised benefits may not make sense compared to the potential harms that will accompany them. Thus, digital inequalities, threats to privacy and greater concentration of power in monetary issues may end up creating more challenges than solutions, particularly when it comes to the most vulnerable layers of society. Therefore, it is imperative that there is great caution when adopting the perspective that the new digital currency will mean an undeniable advance to the economy.