Governor of the Central Bank of Brazil: The use of cryptocurrency has surged

The Governor of the Central Bank of Brazil, Gabriel Galipolo, pointed out at an event held by the Bank for International Settlements in Mexico City that there has been a significant increase in the use of crypto assets in his country. He specifically mentioned that stablecoins, which have lower volatility due to being pegged to physical assets like the US dollar, account for about 90% of cryptocurrency circulation.

Galipolo stated that over the past two to three years, there has been a surge in cryptocurrency usage in Brazil. This is mainly because people are using digital currencies for shopping, especially when purchasing goods from international suppliers. This trend poses certain difficulties for regulatory authorities as these transactions may lack transparency and could involve tax evasion and money laundering issues.

The central bank governor also clarified that Brazil's Drex system is not essentially a central bank digital currency (CBDC). Instead, it is an infrastructure designed to enhance credit supply by leveraging collateralized assets. He explained this is particularly important in Brazil where local financing costs remain high due to limited use of collateral.

Regarding how Drex operates, Galipolo explained that the system will employ distributed ledger technology to handle interbank wholesale transactions. In addition, retail users will access this system through tokenized bank deposits. This innovative approach aims at simplifying settlement processes within banking industry.