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 A blockchain developer claims to have reverse-engineered the source code of Brazil’s pilot central bank digital currency (CBDC) and discovered certain functions that could allow a central authority to freeze funds or reduce balances. 
 However, the developer argues that there might be situations in which these functions could be beneficial. 
 On July 6, the source code of Brazil’s digital real pilot project was made available on the GitHub portal by the country’s central bank. 
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 It was clarified that the pilot project was solely intended for testing purposes and that the presented architecture could undergo further changes. 
 Pedro Magalhães, a blockchain developer and the founder of tech consulting firm Iora Labs, claimed to have successfully reverse-engineered the open-source code of Brazil’s digital real. 
 He revealed several functions in the code, including freezing and unfreezing accounts, adjusting balances, transferring currency between addresses, and minting or burning digital real from a specific address. 
 Magalhães suggested that Brazil’s central bank would likely retain these functions for secured loans and other financial operations based on decentralized finance (DeFi) protocols. 
 However, he pointed out that the code lacks clarity regarding the circumstances under which tokens can be frozen and who holds the authority to execute such actions. 
 These aspects should be publicly disclosed in the smart contracts and discussed with the population, which has not been done yet, according to Magalhães. 
 The cryptocurrency community has expressed concerns that a CBDC could infringe upon financial freedom and privacy. 
 However, Magalhães noted that while these concerns are understandable, a CBDC could also offer certain benefits. 
 For example, it would make taxes more traceable, allowing the public to inspect the allocation of tax funds and purchases made by the state on-chain. This could enhance transparency in parliamentary amendments as well. 
 In July 2022, Fabio Araujo, an economist at the Brazilian central bank, stated that the digital real has the potential to prevent bank runs and provide a safer and more reliable environment for entrepreneurial innovation. 
 The digital real pilot is reportedly running on Hyperledger Besu, a privately operated Ethereum Virtual Machine (EVM)-compatible blockchain. 
 Since it is not permissionless like the Bitcoin or Ethereum mainnets, users would require the central bank’s approval to become a node, as explained by Magalhães on July 7. 
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Central Authority Control Functions Discovered in Brazil’s Digital CBDC Source Code

Crypto Intelligence

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