A blockchain developer who claims to have reverse-engineered the source code of Brazil's pilot central bank digital currency (CBDC) has discovered features that allow central authorities to freeze funds or reduce balances. Pedro Magalhães, the founder of technology con sultancy firm Iora Labs, found functionalities within the code that include freezing/unfreezing accounts, adjusting balances, transferring currency between addresses, and creating/destroying digital real currency. However, he later argued that some of these features could be beneficial depending on their implementation.
The Central Bank of Brazil had published the source code of the digital real pilot project on GitHub on July 6, clarifying that it was for testing purposes only and that modifications to the architecture were possible. Magalhães claimed to have reverse-engineered the code, highlighted ing concerns about the lack of specific information regarding the circumstances and authorities that can enforce token freezing. He emphasized the importance of public disclosure and discussion of such aspects within smart contracts.
While many in the cryptocurrency community express worries about CBDCs infringing on financial freedom and privacy, Magalhães noted that a CBDC could have some benefits. He mentioned that tracking taxes would become easier, allowing the public to monitor the allocation of tax funds and verify on- chain state purchases, ultimately increasing transparency in parliamentary amendments. In July 2022, an economist at the Central Bank of Brazil, Fabio Araujo, highlighted the potential of the digital real to prevent bank runs and provide entrepreneurs with a safer and more reliable environment for innovation .
The pilot project for the digital real reportedly runs on Hyperledger Besu, a privately run Ethereum Virtual Machine (EVM) compatible blockchain. Magalhães further stated that since it is not permissionless like the bitcoin or ethereum mainnets, users need approval from the central bank to become a node in the network.
