Brazil CBDC Includes ‘Balance Freezing and Adjusting’ Code

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  • Brazil’s CBDC includes code which allows the bank to freeze and adjust balances
  • The code was added to GitHub was reverse-engineered by blockchain developer Pedro Magalhães
  • Magalhães argued that there could be a legitimate use for the features

A blockchain developer who claims to have conducted a reverse-engineering analysis of the source code for Brazil’s experimental central bank digital currency (CBDC) has uncovered specific functions within the code that would grant a central authority the ability to freeze funds or adjust balances. However, Pedro Magalhães has argued that there might be circumstances in which such functions could have potential benefits and that the CBDC shouldn’t be considered inherently evil.

Source Code Posted Online

The source code for the Real Digital pilot initiative was made public on the GitHub platform on July 6, with the central bank clarifying at the time that the Real Digital pilot project is solely intended for testing purposes and the “presented architecture” could undergo further modifications.

Later that same day, Magalhães, the founder of the technology consulting firm Iora Labs, claimed to have successfully reverse-engineered the openly accessible source code of Banco Central do Brazil’s Digital Real. In doing so, he revealed the existence of various functions embedded in the code that will concern citizens. These functions include the capability to freeze or unfreeze accounts, modify balances by increasing or decreasing them, transfer coins from one address to another, and generate or extinguish Real Digital from a specified address.

More Information Needed Before Conclusions Can be Drawn

Magalhães shared with Cointelegraph his belief that the central bank of Brazil will likely retain these functions, primarily to facilitate secured loan operations and other financial activities that can be performed through decentralized finance protocols. However, Magalhães pointed out the issue that the code lacks clarity regarding the specific conditions under which the tokens can be frozen and, most importantly, who possesses the authority to execute such actions:

One thing is to agree with an operation and execute a DeFi operation that involves different blockchains; another completely different thing is an institution having the ability to freeze the balance on its initiative, and that’s precisely how they’ve developed the smart contracts.

Magalhães added that “these aspects should always be exposed in the smart contracts publicly and discussed with the population, which hasn’t been done yet.” 

Many individuals in the crypto space and beyond have raised concerns about the surveillance of citizens using CBDCs, with one prominent critic being America’s most dangerous lunatic Ron DeSantis referring to CBDCs as the “weaponization of the financial sector.”