DREX and Open Finance: the Brazilian Central Bank unveils innovations for the Brazilian financial market

Wednesday 29 November 2023

Monique Mavignier
Barbosa, Müssnich e Aragão, São Paulo

Felipe Palhares
Barbosa, Müssnich e Aragão, São Paulo

Gabriel Bürgel
Barbosa, Müssnich e Aragão, São Paulo

Maria Luiza Belmiro
Barbosa, Müssnich e Aragão, São Paulo

Over the past few years, the Central Bank of Brazil (BCB) – the Brazilian financial and monetary authority and regulator of the banking sector[1] – has been paying attention to the impact of new technologies on the financial market. With initiatives such as the instant payment platform PIX, for example, BCB has contributed to innovation in Brazilian financial transactions, an important step in a sector highly sensitive to technological advances.

BCB is currently implementing two initiatives that have the potential to influence the Brazilian financial sector: the Digital Brazilian Real (DREX) and Open Finance. These projects use technology to democratise popular access to the financial system and increase the competitiveness between financial institutions, benefitting banking customers as well as financial products and services customers. This article explores the impact of these two initiatives on the Brazilian financial market and its participants from a regulatory standpoint.


DREX is a central bank digital currency (a CBDC, not to be confused with a cryptocurrency), representing the official Brazilian currency (the Brazilian real) in a digital format. DREX has the same value and acceptance as the traditional ‘paper’ real, is regulated and issued by BCB, and requires a bank or other financial institution to be an intermediate for its transactions.[2]

In practical terms, DREX will allow various types of financial transactions using digital assets and smart contracts to be made available to consumers and investors. These financial services will be offered to the public and settled by banks within the DREX platform, which is still under development. The platform will use distributed ledger technology (DLT), in the same way as blockchain. Banks will act as intermediaries for the transactions within the platform, transferring money deposited in the accounts of the clients to clients’ DREX digital wallets, allowing them to safely carry out digital currency transactions.

BCB published Resolution No 315 in April 2023, which governs the DREX pilot programme. According to this Resolution, the DREX pilot programme aims at validating the use of DLT – evaluating its programmability with financial assets as well as the capacity of observance of legal and regulatory requirements, especially in relation to the data privacy of those involved in the transactions carried out through the DREX platform.[3]Resolution No 315 also establishes that BCB-authorised financial institutions that demonstrate the capacity to test transactions of issuance, redemption and transfer of financial assets will be able to participate in the pilot programme.[4] The incorporation of BCB-authorised financial institutions into the pilot DREX platform began in July 2023; in the first 50 days, approximately 500 transactions of various kinds had already been successfully simulated in the system – including the creation of digital wallets and wire transfers.[5]

The financial market has high expectations for DREX: there is a perception that this initiative has the potential to bring significant changes to the Brazilian financial system.[6] The project also clears the path for the development of a safer crypto sector and the tokenisation of the economy – defined as the use of digital assets in financial transactions[7] – as all assets negotiated through the DREX platform will be tokenised.[8]

On a similar note, the Brazilian Securities and Exchange Commission (the Comissão de Valores Mobiliários or CVM) issued a Circular Letter to guide the securities market – especially service providers that carry out activities related to tokenisation – on the possible classification of certain tokens as securities (valores mobiliários) by the regulator and, as a consequence, the application of the securities regulations to these digital assets. As indicated by CVM, using DLT (or any other technology for the issuance of the asset) does not, per se, decharacterise the nature of the asset or token as a security.[9] CVM will continue to apply the criteria currently used to classify an asset as a security (valor mobiliário), notably in the sense that what attracts and determines the autarchy’s competence in relation to the securities is the public offering or trading of these securities. This is similar to the ‘Howey Test’ created by the US Supreme Court in the well-known precedent case Securities and Exchange Commission v W J Howey Co.[10]

In both financial and capital markets, great attention has been paid to issues related to new technologies, particularly among regulators, with new regulatory measures and proposals being discussed and put into practice.

Open Finance

Another measure implemented by BCB in the tech arena is Open Finance. This is defined as an environment of sharing of data, products and services between regulated entities – financial institutions, payment institutions and other institutions authorised to operate by BCB.[11] This data sharing must be made at the sole discretion of the client through free, informed, previous and unequivocal consent.[12]

Open Finance is a renewal of what was previously known as Open Banking. According to BCB, the change of name to Open Finance reflects a broadening of the project's scope – it now encompasses not only information on more traditional banking products and services, but also data on investment-related products and services, among other things.[13] Despite the gradual adhesion by clients to the project, a new phase called Open Investment is expected to increase the competition between banks, independent brokers and managers.[14]

Open Finance is regulated by Joint Resolution CMN-BCB No 1 of May 2020, enacted by the BCB and the National Monetary Council (Conselho Monetário Nacional or CMN). According to the resolution, the objectives of Open Finance are to:

  • encourage innovation;
  • promote competition;
  • increase the efficiency of the (still highly concentrated) national financial system; and
  • promote financial citizenship – ie, popular access to the banking system.[15]

As stated by the BCB, the ultimate goal of Open Finance is to enhance the efficiency of credit and payment markets by promoting inclusiveness and competitiveness in the business sector.[16]

BCB Circular No 4,015, enacted on the same date as the Joint Resolution, set out the scope of data and services comprising Open Finance. According to this Circular, the information that can be shared through Open Finance includes:

  • data on products and services,
  • service channels;
  • data on customers and their representatives; and
  • data on customer transactions.[17]

Financial institutions and those institutions authorised to operate by BCB will participate in the Open Finance ecosystem. For some banks and services, participation will be mandatory, as follows:

  • the data sharing provisions of Open Finance will be mandatory for the most relevant financial institutions in the country[18] (except for those that do not provide services related to the transactional data of customers);
  • observance of Open Finance rules for the service of initiating payment transactions will also be compulsory for institutions providing customer deposit, savings or pre-paid payment accounts, as well as for payment initiation services providers; and
  • regulated institutions operating in partnership with domestic ‘banking correspondents’ to receive and forward loan proposals will have to participate in Open Finance with respect to the services of forwarding loan proposals.

The other financial and payment institutions authorised to operate by BCB can participate in the Open Finance on a voluntary basis, provided that they offer interfaces for data sharing and are duly registered in the Open Finance participant repository.[19]

Expectations for the future

DREX and Open Finance are not being introduced in a vacuum. The first step of the recent innovation agenda of the Brazilian financial regulators was PIX, the BCB-controlled instant payment solution. This was a milestone in the Brazilian financial sector, enabling the execution of payments and transfers that can be concluded in a few seconds and changing the way Brazilians carry out their daily transactions.[20]

According to data from the BCB, 2.9 billion PIX transfers were carried out in December 2022, which represents a growth of 1,900 per cent in comparison with December 2020 (when PIX started operating).[21]In terms of inclusiveness, 71.5 million users were included in the financial system via PIX – this number takes into account that 12 months before PIX started operating, these users had not made any electronic transfers and only started using PIX after its launch.[22] Among the adult population, 133 million individuals had made or received at least one PIX transfer by December 2022, which represents 77 per cent of the Brazilian adult population.[23] This data shows that PIX has contributed greatly to the inclusion of the Brazilian population in the financial system, and that this instant payment solution has been well received and accepted by society. 

According to BCB President Roberto Campos Neto, the Brazilian financial authority is working on a comprehensive programme focused on innovation: PIX was the first step, acting as a ‘rail’ to help guide the public at large into the digital economy.[24]The second step is Open Finance, which is, according to the BCB President, much more comprehensive in comparison to other open banking platforms in place in other jurisdictions. As a third step, Campos Neto mentions the DREX ‘tokenisation’, which is already being implemented through the aforementioned pilot programme.[25]

In a rapidly changing world, the financial system is required to stay current with daily advances and innovations, with an ever-increasing demand for digital solutions and cybersecurity. The traditional banks that dominated the Brazilian financial markets for decades are investing heavily to keep up with the new trends and technologies and with the recent surge in new competition in the form of digital banks and Fintechs.

With the initiatives mentioned in this article (and others), the BCB aims to adapt the financial system to the digitalisation of the economy and to respond to the demands of the society for a more inclusive and accessible banking system, while ensuring that systemic and prudential regulations are respected – no easy task!


[1] The Brazilian equivalent to the US Federal Reserve, the European Central Bank or the Bank of England.

[2] ‘DREX – Digital Brazilian Real’ (BCB). See www.bcb.gov.br/en/financialstability/drex_en. Accessed on 28 November 2023.

[3] Article 3, BCB Resolution No. 315, 27 April 2023.

[4] Ibid.

[5] ‘Drex: em 50 dias, 500 operações já foram conduzidas com sucesso e 11 instituições operam na rede’. (BCB. 13 September 2023). See www.bcb.gov.br/detalhenoticia/715/noticia.

[6] Marco Zanini, ‘O Drex e a inovação do mercado financeiro’ (eInvestidor, 19 September 2023) See  https://einvestidor.estadao.com.br/colunas/artigos-especialistas/drex-inovacao-mercado-financeiro-brasil/.

[7] ‘DREX – Digital Brazilian Real’ (BCB). See www.bcb.gov.br/en/financialstability/drex_en. Accessed on 28 November 2023.

[8] Aramis Merki II, ‘Drex impulsiona investimentos no setor de criptoativos, dizem especialistas’ (eInvestidor, 27 September 2023). See https://einvestidor.estadao.com.br/ultimas/drex-impulsiona-investimentos-setor-criptoativos/.

[9] Ofício Circular CVM/SSE 04/23 (CVM, 4 April 2023). See https://conteudo.cvm.gov.br/legislacao/oficios-circulares/sse1/oc-sse-0423.html..

[10] CVM Administrative Proceeding No. RJ2003/0499. Reporting Director Luiz Antonio de Sampaio Campos, judged on 28 August 2003.

[11]‘Open Finance’ (BCB). See www.bcb.gov.br/en/financialstability/open_finance. Accessed 28 November 2023.

[12] Ibid.

[13] Ibid.

[14] Álvaro Campos e Mariana Ribeiro, ‘Open finance passa a agregar investimentos’ (Valor Econômico, 25 September 2023). See https://valor.globo.com/financas/noticia/2023/09/25/open-finance-passa-a-agregar-investimentos.ghtml.

[15] Article 3 of Joint Resolution No 1, of 4 May 2020, enacted by BCB and National Monetary Council.

[16] ‘Open Finance’ (BCB). See www.bcb.gov.br/en/financialstability/open_finance. Accessed 28 November 2023.

[18] Those included in regulatory Segments S1 and S2: ie, the largest banks in the country by size and market relevance as defined in the Resolution 4,533/2017, which establishes the segmentation of regulated financial institutions for the purposes of the prudential regulation.

[19] ‘Open Finance’ (BCB). See www.bcb.gov.br/en/financialstability/open_finance. Accessed 28 November 2023.

[20] ‘PIX frequently asked questions’ (BCB). See www.bcb.gov.br/en/financialstability/pixfaqen. Accessed 28 November 2023.

[21] Pix Management Report: Conception and first years of operation 2020–2022 (BCB). See  www.bcb.gov.br/content/estabilidadefinanceira/pix/relatorio_de_gestao_pix/pix_management_report_2023.pdf. Accessed 28 November 2023.

[22] Ibid.

[23] Ibid.

[24] Sérgio Tauhata, ‘Mundo e Brasil Caminham para uma economia tokenizada, diz Campos’ (Valor Econômico, 28 August 2023). See https://valor.globo.com/financas/noticia/2023/08/28/mundo-e-brasil-caminham-para-economia-tokenizada-diz-campos.ghtml.

[25] Célia Froufe, ‘Campos Neto: em dois anos, sistema financeiro do Brasil estará pronto para a IA’ (Estadão, 4 November 2023). See www.estadao.com.br/economia/campos-neto-bc-pix-drex-ia.