Brazilian CBDC Allows Government to Freeze Funds, Developer Finds

By Decrypt July 17, 2023 In Uncategorized

A blockchain developer has reverse-engineered the code behind the Brazilian Central Bank Digital Currency (CBDC) and discovered an unsettling feature: the government has built in the ability to freeze funds and adjust balances.

Pedro Magalhaes, founder of Web3 consulting company Iora Labs, reviewed the Application Programming Interface published by the monetary authority on its Github account. And he says the government has not been forthcoming with an explanation.

“They tend to keep things closed off and usually don’t communicate with non-bankers,” he told Decrypt, although he said he has had some general discussions on Github about the CBDC implementation. “Honestly, they don’t even need to care about public opinion.”

Vini Barbosa, reporter for Brazilian crypto news outlet Portal Do Bitcoin, took to social media to claim thathe spoke to the Brazilian authorities and confirmed Magalhaes’ findings.

Advertisement

“The ability to ‘freeze or arrest amounts’ held in [this system] is protected by current legislation in Brazil, according to the Central Bank,” Barbosa tweeted.

Brazilian banking authorities did not respond to a request for comment from Decrypt.

Magalhaes, who first published the discovery on his LinkedIn profile for “educational purposes,” first thought the function would only refer to DeFi or CeFi, “where it may be necessary to freeze the balances to complete a smart contract operation”—but said the official response was that the central bank can do it any time it wants.

Brazilians are scared, he said, due to the nation’s financial history. In the 1990s, the country’s president froze finances for all Brazilians for 18 months.

Magalhaes said the the only way to fight the central bank’s excessive control over CBDC is to report it on social media.

“They will try hard to adopt it, and they have the power to do it,” the expert in Ethereum’s Solidity programming language told Decrypt. “As a blockchain developer, the only thing I’ve been asking for is: please, provide public smart contracts and let Brazilians know what the Central Bank is doing.”

AD

Stay on top of crypto news, get daily updates in your inbox.

Published on

Decrypt

View the full article

You may also like